SAIRR: Government on brink of fiscal catastrophe

SAIRR: Government on brink of fiscal catastrophe

The South African Institute of Race Relations (IRR) says the budget delivered by finance minister Pravin Gordhan suggests "a government at the brink of fiscal catastrophe and without a plan for either growth or austerity."


According to the IRR's COO, Gwen Ngwenya, the minister's attempt to finance expenditure by way of a bevy of tax proposals is extracting blood from a stone.


These taxes include a top marginal tax rate of 45%, a sugar and carbon tax, an increase in the fuel levy of 30c/l and in the Road Accident Fund levy of 9c/l.


"Tax revenue as a proportion of GDP has increased from 21.9% in 1994/95 to a projected 29.8% in 2017/18. The state is therefore taking a greater proportion of the wealth generated in the economy. The implication is that the state believes it is able to spend more effectively and efficiently than consumers and the private sector," Ngwenya says.

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According to Ngwenya, government has come close to maxing out the revenue it can extract from the economy - but has no workable plan to create new revenue. 


"Taxpayers are over-bled, further borrowing will raise debt levels thus hasten the prospects of rating downgrades and austerity will serve to directly undermine the political future of the ANC. The government has very little room to manoeuvre. If current growth and revenue collection targets are not met, the government may find itself in a considerable degree of fiscal, and therefore political, difficulty," she says.

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