Tax increases unnecessary, says DA

Posted 24 February 2015 Written by Business Day
Category Budget

The Democratic Alliance came out swinging ahead of SA's Budget speech, arguing that the well-publicised and expected increases in taxes are not necessary. Rather, the government should cut back on wasteful spending and start selling off state-owned assets.

The tax increases that are expected to be announced by Finance Minister Nhlanhla Nene in his budget speech on Wednesday are "unnecessary and unjustifiable", Democratic Alliance (DA) finance spokesman Dion George said on Tuesday, according to Business Day.

Rather than adding to taxpayers’ burdens, the government should look for ways to cut wasteful expenditure, he said at a media briefing to present the DA’s alternative budget.

This would include stemming the billions of rand lost to corruption each year and trimming the "bloated" government bureaucracy.

In the medium-term budget policy statement Mr Nene indicated that R12bn in additional revenue would have to be found to make up the shortfall, but Mr George said more than R14bn could be found just by slashing the public sector wage bill.

"Our budget would arrest the decline in the management of our public finances and breathe new life into our stagnant economy," he said.

The DA’s proposals focused on accelerating small business, addressing youth unemployment and boosting trade and infrastructure development."In the long term, the DA would create an environment that stimulates the economy and creates jobs. In doing this, more people become employed, and the tax base widens — resulting in government receiving more revenue without raising any tax percentage."

It proposed injecting R9.3bn to stimulate and empower small businesses through small business incubators, red-tape reduction units across the country, and a national venture capital fund.

Also, it believed funding for the National Student Financial Aid Scheme should be gradually increased to R16bn and that R10bn could be saved by reducing corruption and maladministration.

Further savings of R355m could be achieved by getting rid of all deputy minister positions.

In addition, the DA proposed breaking up the Eskom monopoly by subdividing it into separate generation and transmission units and listing 49% of SAA on the Johannesburg Securities Exchange over 24 months.

Keep tax increases to a minimum

Meanwhile, the SA Chamber of Commerce and Industry has urged government to keep any tax increases to a minimum.

Any tax increases to be announced in the budget on Wednesday should be kept to the bare minimum to avoid putting more pressure on small businesses and consumers, says South African Chamber of Commerce and Industry (Sacci) acting CEO Peggy Drodskie.

While the chamber understood the need to have a "greater inflow" of funds into government coffers, SA needed a special focus on the plight of small businesses, Ms Drodskie said.

"We hope that these (tax increases) are going to be kept to the bare minimum because as it is at the moment, the cost of doing business in SA is very high and we do not want to add an additional burden, particularly to the small business sector."

Finance Minister Nhlanhla Nene is expected to announce more tax increases than in previous budgets as the government tries to close the large gap between spending and revenue.

With the government already having put a spending ceiling in place, the focus would fall on taxation as the key to reducing the budget deficit, said Old Mutual Investment Group chief economist Rian le Roux.

Raising taxes to reduce the deficit was "a small price to pay" rather than the alternative, which was to risk having SA’s sovereign credit rating downgraded to junk status, a slump in the rand, surging inflation and higher interest rates, he said.

Small business owners and consumers have had fuel price relief over the past six months. This will be slightly reduced by an expected 80c/l increase in the petrol price next month.

SizweNatsalubaGobodo tax services head Kemp Munnik said simplifying the tax structure for small and medium-size enterprises (SMEs) would do a lot to support economic growth. He said the Treasury should offer more incentives to small businesses while reducing red tape.

Read more.


The views expressed herein are those of the author and do not necessarily reflect those of Acts Online. Acts Online accepts no responsibility for the accuracy, completeness or fairness of the article, nor does the information contained herein constitute advice, legal or otherwise.