BUDGET PREVIEW: Prepare for higher taxes and possibly a 'super tax'
Markets are eagerly awaiting the annual Budget Vote, set to take place in February, and speculation is mounting that taxes could be increasing this year.
The Minister of Finance will deliver the Budget Vote after the State of the Nation Address (Sona) by the President, and economist Davie Roodt says South Africans should brace for higher taxes.
"It's important for us to understand that the state's finances are in very, very deep trouble - it is totally unsustainable - and that simply means the Minister of Finance has two choices," says Roodt.
"Either he needs to cut back on state spending, which effectively means you have to spend less on civil servant salaries as an example, or he needs to increase his revenue, in other words, increase taxes."
Roodt says while the Minister will try and cut back on state spending, it's politically difficult to do, leaving him needing to increase the state's income base.
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"I'm afraid that a number of taxes will be increased - things like the fuel levy and sin taxes will be increased, while certain other taxes like personal income taxes are also likely to increase."
Roodt says it's even possible that Value Added Tax (VAT) could go up again, and that government could introduce a so-called "super tax" on very high-income earners, something he believes would be a very bad idea.
"It's simply not going to work, because the super-wealthy have already left and if you tax them even further even more people will leave," he says.
"It is already the wealthy that carry by far the biggest tax burden in South Africa and further increasing that is simply going to alienate the wealthy and successful and productive people that are still left in the country.," says Roodt.