Economist: VAT only tax left for govt to raise
An economist believes that the only remaining tax that can be raised is the value-added tax, as all other avenues have been exhausted.
Efficient Group economist Dawie Roodt’s comments follow Wednesday’s decision to push back the national budget speech to Parliament in a shock move following internal pressures over tax hikes.
Finance Minister Enoch Godongwana was due to deliver a speech in Cape Town outlining the government's annual fiscal priorities, including ways of raising revenue.
This included a rise in VAT from 15% to 17%.
"Unfortunately, the reality is that other taxes are no longer viable. Personal income tax, company taxes, they have all been maxed out and cannot be increased further," Roodt explained.
While acknowledging that minor taxes could still be adjusted, he said the move wouldn’t generate sufficient revenue.
Roodt urged the government to curb spending, although he admitted this would not be an easy sell to the ANC’s alliance partners.
"I think maybe something good will come out of this. Perhaps the ANC-led government will recognise its past mistakes and adjust its approach," he told Jacaranda FM News.
With the delay, discussions on boosting economic growth without additional tax hikes or borrowing have intensified, sparking debate over how to drive sustainable economic expansion.
Roodt argued that meaningful policy reforms are the only viable path to long-term growth.
"We have to get rid of this land expropriation nonsense, stop Black Economic Empowerment, and reform the procurement system, which makes state purchases unnecessarily expensive. Unfortunately, these changes are politically difficult to implement," he said.
Following the budget postponement, the rand dropped by 0.9% before partially recovering by 0.2% as attention shifted to South Africa's G20 presidency.
Roodt believes the markets could react positively when the budget is finally presented on March 12.
"The financial markets remain under pressure, but there's a cautious optimism, a wait-and-see approach, with hope that something positive could emerge," he noted.
Meanwhile, President Cyril Ramaphosa has assured South Africans that Cabinet discussions are focused on delivering a budget that balances economic growth with protecting vulnerable citizens.
