Budget Preview

The following article is an excerpt from our February 2018 newsletter:

Minister Gigaba will present his first full budget speech on the 21st February 2018. This has to be one of the most important budget speeches announced post-democracy – one that could make or break our fragile economy.

The scale of funding the budget deficit alone is daunting, set against a backdrop rebuilding investor confidence in “brand South Africa”. The starting point, according to the medium term budget speech, is the funding of a budget deficit in excess of R50 billion. Then Zuma’s bombshell announcement of free education has really set the cat amongst the pigeons. According to the Davis Tax Committee we would need at least an additional R60 Billion per annum to fund this. Treasury has bandied about figures of between R12 Billion and R20 Billion. We won’t even start discussing what additional funding our State Owned Enterprises may require. The departure of Michael Sachs, a key player in the formulation of our budget, says it all! Treasury is going to be hard pressed to come up with a workable solution, balancing the funding needs while at the same time stimulating an underperforming economy.

Some Potential Tax Implications:

  • Probable increase in Vat by 1% to 2 %
  • In order to soften the “political blow” of a VAT increase some form of wealth tax or increase in the maximum marginal rate of tax
  • Increasing the tax net
    • See our article on the Religious sector
  • Improving liquidity by enforcing compliance with submissions and payment of taxes
    • See our article on Tax Deadlines

Whatever the “solution”, it is going to a hard and bitter pill to swallow. We will keep you informed of
developments around the much anticipated budget speech.

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