We are bankrupt, but the news is not all bad

Even though South Africa’s taxpayers heaved a sigh of relief yesterday – Finance Minister Tito Mboweni did not announce any new taxes – they will continue to feel the effects of government’s increasingly desperate efforts to raise money.

There will be increases in the fuel levy, as well as in “sin taxes” (the taxes on alcohol and tobacco)… something which happens with monotonous regularity in the annual budget.

The decision not to raise the VAT rate, which could have brought in more than R25 billion to government coffers, was an acknowledgment by the government that the taxpaying public cannot be milked much more. Likewise, the decision to leave tax rates unchanged is also recognition of the fact that such moves can be counter-productive.

By Mboweni’s own admission, the shortfall in tax income shows how vulnerable personal and corporate taxpayers are because of our faltering economy. Just last year, the government was projecting the tax shortfall would be R52.5 billion, but it has been predicted to come in at a shocking R63.3 billion.

The minister did make some sensible moves towards improving our overall fiscal stability: he said government aimed to save more than R37 billion from reducing the public sector wage bill, cutting wasteful expenditure on the current “subsistence and travel” allowances paid to civil servants, as well as stipulating all government’s internal air travel should be in economy class.

There was a commitment to spending huge amounts – more than R60 billion in the case of Eskom and SAA this year alone – to stabilise our ailing state-owned enterprises, but there was no announcement of radical action on them either.

Overall, the bad news is that national debt is going to spiral to R3.56 trillion (or 65.6% of GDP).

We’re still bankrupt as a nation. And that’s the issue Mboweni kicked down the road.

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