In summary a pretty boring budget especially with regard to tax!! SOE’s (eg Eskom, SAA, etc) received a lot more attention than taxes which across the board remained the same as last year with a few minor adjustments. The outcome of this for individual taxpayers is that real (after inflation) income is effectively reduced as no allowance was made in the tax brackets for inflation. VAT was left at 15% with a few items added to the zero-rated list and corporate tax rates including dividend withholding tax were left unchanged. The usual target taxes, being sin taxes on cigarettes and alcohol, the fuel levy and the sugar tax, were increased. Medical scheme tax credits were left as is – once again a real after inflation decrease.
Whilst there were minor adjustments in rebates, all in all the average taxpayer will be left worse off after inflation – not a great result but inevitable under the current economic stress the country finds itself in.
What is worrying from an economic point of view is the higher fiscal deficit – the gap between what the country is spending and the tax it is collecting – is increasing. This results in higher debt being taken on by the government and higher interest costs – interest is now 11,4% of budgeted expenditure. As recently as the 2015/16 budget year the fiscal deficit was R140 billion – for the coming year it is forecast to be R242.8 billion – a 73% increase in 4 years which is something a country with low economic growth like ours will battle to reduce.
Eskom appears to be in such a mess that the government had little choice other than to continue propping it up. Its proper functioning is essential to ensure the country has a chance to improve economic growth rates – projected to be a miserly 1,8% in the year ahead – as without an improvement the outlook is not a rosy one. On a positive note it appears we now have a better chance of achieving this than we did just over a year ago!
