The minister is set to deliver the mini-budget speech today on Wednesday the 24th of October. The mini-budget speech is not the platform to announce tax increases but rather a proponent of wealth tax, intended to reflect the government’s policy position.
However, as the mini-speech fast approaches so does the anxiety of hearing the new economic state of our country. So, what can we expect to here in tomorrow’s mini-budget speech?
It’s no secret that South Africa is currently amidst an economic struggle. We can feel it everywhere from the way we use transport to the food we choose to put on our tables. We know that economic growth has disappointed since February, having even entered a ‘technical recession’ in the second quarter of this year. The growth estimate has dropped three times over the duration of the year. Tomorrow we can expect news of a further revised drop from 1.7% growth to 0.7% for the remainder of 2018.
We have already noticed that tax collections are not mirroring the tax increase introduced at the beginning of the year. Aside from tax evasion and avoidance, it is high VAT coupled with an economic slowdown is responsible for putting collection rates slightly higher. Fewer people are employed, which means less tax income. We can also expect to hear new statistics on the decrease of consumer spending as well as high net worth individuals emigrating and taking their wealth with them as contributing factors to the inconsistent tax collections.
They are unlikely to announce tax charges in the mini-budget speech tomorrow., as it is not the forum to do so. Although revenue collections will spur obvious debate, a possible material tax increase will only be announced in 2019 budget speech. As high tax and utility costs have contributed to slowing down the economic growth of the country – and at its current trajectory may not be able to handle further increases till next year. We should, however, expect discussions on personal tax incomes, taxes on the super wealthy as well as discussions on sin tax will likely be on the cards.
The mini-budget may reflect a revised target of – 3.8% compared to the original GDP projection of -3.6% in Feb this year. Although this decrease seems worrying, apparently the decrease is ‘pretty good’ given the weak economy. However, we should also expect discussions about how new Finance Minister plans to reprioritise the R50bn expenditure set aside for stimulus package and what area he plans the redistribution of the set budget.
Reprioritization of Funds.
The reprioritisation of government expenditure to accommodate the R50bn identified in the Economic Stimulus Recovery Plan will be announced in the mini-budget. This R50bn is likely to come from unspent funds and the diversion of future funding from underperforming areas.
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