A leading academic from a private international tertiary institution says taxpayers will be hardest hit by Finance Minister Malusi Gigaba’s budget proposals in the light of increases in VAT and fuel levy and lack of sufficient adjustment for fiscal drag.
Yashin Brijmohan, executive dean of the faculty of business, engineering and technology at the Johannesburg-based Monash South Africa, also warned that it was important that the government addressed the risks related to a possible increase in aggressive tax planning, tax avoidance and tax evasion due to the incentives created in the budget for taxpayers to reduce their tax costs. This is coupled with a greater need to strengthen tax compliance.
In an interview with The Citizen, Brijmohan yesterday said by not making enough allowance for inflation it essentially means it will push taxpayers into higher tax brackets.
“Remember that the addition of a new tier to the tax rates was made last year (this was at 45% as exceeded R1.5 million). However, the minister did indicate greater relief for lower income brackets, which may alleviate the impact this has on the poor, as well as the increase in social grants,” he said.
“However, individuals in the transformation categories that have entered into middle and higher income areas now will have less capacity to grow, and develop new business opportunities in their personal capacities, and could have a compounding effect on addressing transformation imperatives in South Africa,” Brijmohan said.
The academic said it was concerning that Gigaba’s budget proposals would have additional cash flow implications on the taxpayer due to the VAT increase from 14 to 15 percent and the fuel levy rise of up to 52 cents per litre from April.
Brijmohan said it was positive to note that there is an indication of support to SMMEs, and an expectation of 3.3% growth in sub-Saharan Africa combined with political stability.
“The minister was positive in addressing investor confidence by also mentioning political stability, and rather focused on preventing further downgrades rather than giving an indication of how we would improve our rating.”
On the free education funding, the expert welcomed the idea that access to education had increased to all levels in society. Gigaba promised to recover the R36 billion earmarked for free education funding through tax.
“It needs to be seen how the VAT increase impacts the costs of living and incidental education-related costs such as textbooks, materials, printing … for the student, and mechanisms need to be put in place to address this,” he said.
Brijmohan stressed that free education must be qualitative while funding had to be utilised responsibly.
“It is important that while we have fee free education we must remain committed to maintain quality education and focus on keeping the cost of education as low as possible,” he said.
He was impressed by Gigaba’s mention of the role of private industry and social partners as contributors to the growth of the economy saying Monash South Africa remained committed to providing this support as a private tertiary education provider with a campus in Johannesburg.
“It is encouraging to note that the minister did reiterate from the president’s address that this is an era of change and hope for a better society, with a strong focus on ethical and decisive leadership. Responsible fiscal constraint and management is critical to achieving the objectives outlined in the budget and strict management of fruitless and wasteful expenditure needs to be implemented.”
“In addition, the focus on innovation, and creating job opportunities through real growth opportunities are essential. We must take on the opportunities provided to us by the fourth industrial revolution, and must remain committed and focused in preparing our people with the right skills for that,” he said.