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Much speculation has gone into the increment of VAT by National Treasury; with the budget speech to take place today, the business community is calling on treasury to improve on its revenue collection strategy than to increase taxes.
The postponement of the budget speech on 19 February 2025, has created policy and economic uncertainty in the country, with markets reacting negatively, though it was not catastrophic, the postponement sent a negative message to investors and the markets alike about the ability and efficiency of the Government of National Unity (GNU).
The CEO of Business Unity South Africa (BUSA) Mr Khulekani Mathe, says today’s budget speech must reduce policy and economic uncertainty in the country. He further called on the GNU to show a united front, that parties can manage their political differences and meaningfully co-operate in the interest of all South Africans.
That the GNU is committed to pragmatic programmes and policies that are focused on facilitating inclusive economic growth, the only way to sustainably reduce unemployment, poverty and inequality.
That the GNU is committed to responsible fiscal management, necessary to ensure that South Africa has the capacity; and will not need to depend on others, to cope with the present global political and economic upheavals.
Mathe says, while South Africa is implementing and pursuing initiatives that target economic growth, a revenue strategy is needed in order to reduce debt; though it will require difficult trade-offs but is necessary to kick-start constructive conversations that will lead to all parties involved to agree on a path to higher levels of inclusive economic growth.
“BUSA recommends that, rather than resorting to tax increases, National Treasury focuses on broadening the tax base and improving tax compliance. This can be done by strengthening the capacity of the South African Revenue Services (SARS) to improve tax compliance, enforce controls over illicit trade and improve efficiency in revenue collection,” said Khulekani Mathe.
The BUSA CEO says increasing taxes in an already narrow tax base will only hurt the economy of the country as South Africa cannot afford any more burdens regarding taxes. Increasing VAT, Corporate Income Tax (CIP) and Personal Income Tax (PIT) coupled with the increase of other fees and levies, will weaken consumer spending, reduce household disposable income and erode investor confidence.
Taking a page from the global economic trend, Mathe says annual wealth taxes often do not result into significant additional revenues.
“A strategic approach is needed to identify savings, eliminate inefficiencies, and address wasteful expenditure. This needs to be done through a considered review of programmes that can be eliminated and the state assets that can be sold. Widespread shaving of spending is no longer enough and wasteful and unproductive spending needs to be eliminated wholesale.
Spending must be redirected to key priorities that support a pro-growth agenda and support necessary increase in education, health care and infrastructure. Ultimately, government expenditure needs to deliver measurable economic benefits that bolster growth,” concluded Mathe.
