[Image: FMT]
Wednesday’s national budget seems to have economists divided, with the only consensus being that there are tough times ahead for South Africans.
According to Business Day, economists think the “Donald Trump administration’s aggressive approach to SA could fuel risk perceptions and drive up long-term borrowing costs, reversing the gains government bond yields have made thanks to the GNU confidence boost.”
If you don’t get economics, this simply means that Trump’s presidency could not have come at a worse time for South Africa. The economy was seemingly just getting on a better footing, and despite their differences there appeared to be some good steps being taken by the shaky GNU.
Despite holding the line on increasing taxes, Finance Minister Enoch Godongwana suggested to the Cabinet that a tax hike could be necessary. Even though the minister has previously insisted that hiking tax would be bad for economic growth and that personal income tax levels are at their limit, it seems the government will have to do something to cover the expected revenue shortfall and additional spending pressures.
According to News24, the DA and Cosatu have both warned they would resist tax increases, particularly VAT and Personal income tax, but a percentage point increase in VAT or Personal Tax would raise around R25 billion a year, and the government will have its pound of flesh if it wants it.
“The DA strongly opposes any tax increases and does not support increases to personal income tax, corporate income tax and value-added tax. We are deeply concerned by reports in the Sunday Times that tax increases may be tabled… Any tax increases will face widespread resistance—not only from Parliament but also from within the GNU.”
Cosatu also said they “vehemently reject any increase in taxes upon the working class, in particular, VAT or personal income tax for low-income earners”.
“It would send a message to society that the government cares more about balancing tables and graphs than workers being able to put food on the table and pay for electricity. This is a message that politicians would be very wise to listen to as we head towards the highly contested 2026 local government elections, in particular our ally, the ANC.”
Treasury needs more money to absorb the 5.5% wage increases for public servants as well as possible further bailouts for state-owned enterprises. On top of this, Transnet and Eskom are also standing with their hands out for assistance.
“The Sunday Times reported that the government plans to “squeeze more out of taxpayers to fund a projected R300 billion shortfall”.
News24 notes that the Public Economy Programme predicts that the Treasury will not achieve its goal of arresting the rise of debt service costs, with SA’s debt-to-GDP ratio expected to reach 75.5% by the end of the 2024/25 financial year.
The Public Finance Management Act only allows the Treasury to continue drawing from the National Revenue Fund in the first four months of the new financial year, so beyond that they will need the other political parties to agree with their budget, which by the sound of it will be hard to achieve.
Everything is stretched to the max, with business owners and private citizens already forced to make painful choices to cushion the never-ending blows. And we thought 2024 was a bad year.
We’ll be keeping a close eye on what the Finance Minister has to say on Wednesday, but it has become obvious that partnering with professional accounting services that specialise in tax compliance has become a necessity for any business or individual. Galbraith Rushby has been our saving grace for nearly a decade, so if anyone can help us survive this latest nightmare, it will be them.
[Source: News24 & BusinessLive]
