REVIEW: MEDIUM TERM BUDGET POLICY SPEECH

The following article is an excerpt from our November 2017 newsletter:

Overview

There was not much good news, with revenue shortfalls projected in 2017/18 to be R50 billion, R69 billion in 2018/19 and R89 billion in 2019/20. So, a collective shortfall over the next three years of over R200 billion, with limited detail on how to fund it. There is mention of the sale of state assets to fund the SAA bailouts etc. There appears to be no concrete plan of action besides the possible sale of some Telkom shares.

We appear to be stuck in a low growth trap, with limited vision for a way forward. There is immense political pressure to act in accordance with the wishes of key political figures and it appears that only a radical change in government leadership will result in the required growth and confidence in the economy that will enable radical economic transformation.

Tax measures

Carbon tax is firmly back on the agenda. In minister Gigaba’s speech he comments as follows:

“I am also happy to announce that Cabinet has approved the release of the carbon tax bill to Parliament for formal consideration and adoption.”

A revised draft bill will be published for public comment shortly. This probably will be early in 2018 with a view to implement 2nd half 2018.

Funding the current shortfalls in revenue is going to be in part via increased taxes.  For instance, the issue of funding the National Health Insurance via adjustments to the existing medical tax credits is still being mooted. The Davis Tax Committee is being consulted on this issue to assess the viability of such changes.  “Sugar Tax”  is under consideration in Parliament with a proposed implementation date of 1 April 2018.

There is no doubt that a lot hinges on the outcome of Decembers political deliberations. The budget in February 2018 promises to be extremely interesting!

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