Budget must focus on solutions, says SAIPA

* Since releasing this statement, Netwerk24 published it in Afrikaans http://bit.ly/1LbXaP8

The South African Institute of Professional Accountants (SAIPA) has issued a call for the 2015-16 budget to focus on finding solutions based on the country’s economic realities. 
Ettiene Retief, chairperson of the National Tax and ARS Stakeholders Committees at SAIPA, says that Nhlanhla Nene, the Minister of Finance, faces a tough challenge when putting together his first annual budget. “The bottom line is that the Minister faces the prospect of less tax revenue than government needs. How he attempts to resolve this dilemma will have far-reaching consequences,” Retief says. 

Retief argues that a number of factors have to be considered when arriving at the right solution. The main problem is expanding the tax base, and the level at which taxpayers can contribute considering the substantial number of people that have been retrenched due to business failures, business rescues, and companies trying to curb losses. The sad truth is that the economy simply is not growing fast enough to create new taxpayers (individual or corporate). South Africa thus remains highly dependent on a small pool of taxpayers to fund government expenditure: 0.1 percent of corporate taxpayers have assessed taxable income in excess of R100 million, 7 percent of registered VAT vendors pay 75 percent of VAT, and 34.5 percent of all tax revenues come from a small number of individuals. 

Retief says that the lack of economic growth can be attributed to a number of factors, among them lacklustre global performance. Back at home, the ongoing labour volatility and lack of power are directly affecting the companies and sectors that make up the most productive parts of the tax base, among them manufactures, retailers and miners. 

“The real impact of labour unrest and Eskom’s woes is the reduced growth in the economy with everything that means—including fewer taxes,” Retief says. “The easy answer is for the Minister to raise taxes for the small pool of individuals and companies that already pay most of the tax. However, the danger here is that this would in turn negatively impact the economy by reducing disposable individual income, and further constraining companies’ ability and inclination to create new jobs, not to mention impact on foreign investments. VAT receipts would also be likely to suffer due to the reduced disposable income.”

Increased taxes would also risk fuelling taxpayer dissatisfaction, which is already being clearly expressed in social media forums and in “revolts” like the refusal to pay e-tolls in Gauteng. While some commentators have suggested that a tax revolt is possible, Retief believes it would be unlikely for a number of reasons. He does warn, however, that tax morality could be hard hit by raised taxes given high levels of dissatisfaction with high levels of corruption and “fruitless and wasteful” expenditure by government entities. 

“Previous finance ministers have promised action on both these issues, but taxpayers need to see some concrete action now,” Retief says. “A genuine focus on eliminating corruption and ensuring that money spent gets the right results will go a long way towards solving the problem at least in the short term. However, the long-term solution is to find ways of stimulating economic growth and the required infrastructure to create sustainable jobs and thus broaden the tax base and increase the taxable income of taxpayers.”

ENDS

MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@thatpoint.co.za, www.atthatpoint.co.za  

For more information on SAIPA please visit:
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