Budget 2020: ‘Tito Mboweni will be walking a tax tightrope’

A tax expert said Finance Minister Tito Mboweni would be walking a tightrope if he wanted to use more tax to raise government revenue. File Photo: Reuters

A tax expert said Finance Minister Tito Mboweni would be walking a tightrope if he wanted to use more tax to raise government revenue. File Photo: Reuters

Published Feb 26, 2020

Share

Cape Town - A tax expert said Finance Minister Tito Mboweni would be walking a tightrope if he wanted to use more tax to raise government revenue.

Asked if there were any more cows that Mboweni could milk, economist Dawie Roodt said: “There’s not really anything new that can be taxed. We’ve pretty much taxed everything that can be taxed.

“Maybe we’ll see a wealth tax, but this won’t be a short-term solution. In the end Mboweni will probably just increase VAT.”

Head of fixed income at Anchor Capital SA Nolan Wapenaar said: “South Africa’s problem is that government is too big. Mboweni can get creative with obvious avenues such as raising VAT by 1%, but that will have unwanted social and political impact.

“He could try to raise personal income tax, but the tax base for that is too low and he cannot afford to alienate that constituency too much, so the minister will probably settle for bracket creep,” said Wapenaar.

Bracket creep is when inflation pushes wages and salaries into higher tax brackets, leading to a deflationary effect on the country’s economy.

Wapenaar said: “Corporate income tax is a bad idea as not many corporates are making that much profit, and sin taxes on tobacco and alcohol will not give him much of a meaningful rise. What he should do is raise estate duty and capital gains tax.”

Finance and Economic Opportunities MEC David Maynier said: “Rather than tax hikes, the minister should focus on slashing expenditure, starting with the public sector wage bill and zombie state-owned enterprises such as SAA, Eskom and Denel.”

Good Party secretary-general Brett Herron said: “The government must raise taxes where necessary. Cigarette taxes bring in R13 billion a year, but the health costs of smoking and tobacco use cost the country R59bn. Tobacco taxes need to be raised to recover these costs.”

@MwangiGIthahu

[email protected]

Cape Argus

Related Topics:

budget2020