[imagesource: Andrey Popov]

There are two things that are certain in this world – death and taxes.

I’d add a third – somebody who went to Bishops telling you that within 15 minutes of meeting them.

All eyes are on President Cyril Ramaphosa and his State of the Nation Address (SONA) this evening, which is likely to drive us all to drink.

One issue he will need to address, whether tonight or in the near future, is the Basic Income Grant (BIG). The R350 social relief of distress grant is due to expire next month, which will affect millions of South Africa’s poorest citizens.

There have been increased calls to make that permanent. Doing so would require additional cash and for that tax experts and economists predict we’re likely looking at tax increases.

Estimates on the cost of permanently increasing BIG vary wildly. A study by Intellidex showed costs ranging between R160 billion and R520 billion annually.

Michael Sachs, head of the National Treasury’s Budget Office between 2013 and 2017 and current professor of the Southern Centre for Inequality Studies at Wits, has laid out the options.

This via BusinessTech:

• Removing the tax breaks on retirement savings would raise the effective rate of Personal Income Tax for the most affluent;
• Government can also step harder on the brake of fiscal drag, which distributes the burden onto the middle strata but creates inefficiency and perverse incentives;
• A better approach would be to raise the rate of value-added tax (VAT).

The standard rate of VAT increased from 14% to 15% in April 2018.

A report published last month by the National Economic Development and Labour Council (Nedlac) concluded that income tax, corporate tax, and VAT hikes were likely options to immediately bolster the tax coffers.

Sachs said planning ahead was needed:

“Tax increases need not be implemented immediately but must be announced far in advance. Delaying tax increases would help reap the multiplier effects of the new spending.

“But upfront clarity on plans for increased taxation is needed to limit the deterioration in financial conditions which, if left unchecked, could overwhelm any positive multiplier effects. Tax changes of this magnitude also require extensive public deliberation and policy work to ensure effective design and orderly implementation can take place.”

I really don’t mind paying a little extra here and there as long as that money is put to good use uplifting the quality of life for the majority of South Africans, rather than new wheels and overseas trips for our politicians.

Whatever happens, we’re just glad to have Galbraith | Rushby in our corner to handle anything the taxman throws our way.

Over to you and tonight’s SONA, Cyril.

[source:bustech]