#MTBPS2015: Nene pledges caution on new taxes

#MTBPS2015: Nene pledges caution on new taxes

Finance Minister Nhlanhla Nene on Wednesday said he would treat calls for new taxes with “caution” given the continued weak economic outlook.

Nhlanhla Nene in Parliament
Gallo Images

Tabling his medium-term budget policy statement (MTBPS), Nene told MPs: “Given the weak economic outlook, proposals for additional taxes — which are essential to fund government’s ambitious policy agenda — will be approached with caution.”

He said over the medium term, government would focus on tax reforms that promote efficiency, and would take into account the recommendations of the Davis Tax Committee. The committee still has to finalise a raft of recommendations but has so far rejected the idea of a wealth tax, but mooted a drastic overhaul of trusts to increase tax revenue.

“Initiatives already under way include measures to combat base erosion, profit shifting and the misuse of transfer funding,” Nene added.

Tax changes are traditionally announced in the main budget in February.

Trade union federation COSATU warned Nene on the eve of the MTBPS that it would oppose any tax increases that would worsen the plight of workers, notably a hike in value added tax.

In terms of revenue collection, Nene said personal income tax buoyancy has been supported by higher tax rates announced in his February budget, but forecast that this would decline over the medium term. VAT revenue remained lower than in recent years, suggesting that households remained under pressure.

He said contractions in the mining and manufacturing sectors — a result of poor global demand, lower commodity prices and local electricity constraints — resulted in under collection of corporate income tax.

Since indicators suggest that mining and manufacturing activity was unlikely to recover in the remainder of the year, this was forecast to remain weak, but show a gradual increase in the later part of the medium term period. - ANA

(File photo: Gallo Images)

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