Economists convinced of looming 'solidarity tax' hike
South Africans may have to read between the lines about a possible tax hike when President Cyril Ramaphosa delivers the annual State of Nation Address on Thursday.
Economists believe a tax hike is on the cards.
This comes after government hinted the need to increases taxes to help foot the bill for the Covid-19 vaccines.
Economist at Econometrix Azar Jammine says there is some rationale in implementing higher taxes for some groups.
"Naturally there is potential for tax increases but obviously these will not be announced in the SONA. The only thing that might be provided is a vague indication of whether or not we can expect increase in the forthcoming budget.
"There is a rationale for introducing tax increases and to penalise higher income groups. Higher income groups suffered a lot less than lower income groups in the Covid crisis."
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Jammine says figures already show government collected more revenue than anticipated in the medium-term budget policy statement in October.
"The government is aware that increasing taxes can dampen economic activity so there is a lot of uncertainty there."
Efficient Group economist Dawie Roodt also believes South Africans will feel the pinch in their pockets.
"The state finances is in very, very deep trouble and the right way to fix this is simply to spend less money but of course politically, that is very difficult to do and so the alternative is to somehow get money somewhere else. I'm very sure that there will be tax increases. The only question is where and when," says Roodt.
"That does not mean the minister of finance is going announce significant increases in this budget but there is certainly the possibility for some sort of levy or some sort of extra tax. The minister of finance has already referred to that as the solidarity tax.”
"A solidarity tax in my mind may take one or two forms. One is the wealth tax, but I don't think we're going to see a wealth tax because it's too complicated and we just don't have time. The easiest way to try to get more money is to add to the personal income tax," he explains.
Finance Minister Tito Mboweni is expected a detailed budget speech in two weeks time.
