Treasury director-general acknowledges that the tax increases in the pipeline will hurt growth but says failing to achieve fiscal consolidation is a more painful risk
The tax increases in the pipeline in the next two years
would undoubtedly be painful and hurt growth but the alternative was far
worse, Treasury director-general Lungisa Fuzile said in Parliament on
Thursday.
Tax increases of R28bn next year and R15bn the year after will be necessary for the Treasury to pursue its fiscal consolidation objectives.
Fuzile said in a briefing on the medium-term budget policy statement to Parliament’s two finance committees that raising personal income tax would lower the disposable income for households while an increase in VAT would mean prices would rise and people would be able to afford to buy fewer things.
"There is no question that these things will have that kind of effect. However, the central point that we make is that notwithstanding those likely risks of impact on growth, there can be a much more painful risk is if we were to fail to act to achieve fiscal consolidation because a lot of what would arise out of that would have much more negative consequences," Lungisa said.
Tax increases of R28bn next year and R15bn the year after will be necessary for the Treasury to pursue its fiscal consolidation objectives.
Fuzile said in a briefing on the medium-term budget policy statement to Parliament’s two finance committees that raising personal income tax would lower the disposable income for households while an increase in VAT would mean prices would rise and people would be able to afford to buy fewer things.
"There is no question that these things will have that kind of effect. However, the central point that we make is that notwithstanding those likely risks of impact on growth, there can be a much more painful risk is if we were to fail to act to achieve fiscal consolidation because a lot of what would arise out of that would have much more negative consequences," Lungisa said.
Finance Minister Pravin Gordhan said that the Treasury would have to take this calculated risk in raising taxes.
He
stressed that there was no final decision on the nuclear new build
programme. "What we are quite clear on is that there are very distinct
phases in these matters."
Everyone should understand the steps to be taken, the regulatory framework and the affordability of the proposal.
The Treasury would divulge the nature of the tax increases only when Gordhan tabled the 2017-18 budget.
However, there is a sense that individual taxpayers are already overburdened, that SA cannot afford to increase the corporate tax rate if it wants to attract investment and that a hike in VAT will be politically unpopular.
Labour federation Cosatu has already warned that it will fight against any proposal to increase the VAT rate.
Everyone should understand the steps to be taken, the regulatory framework and the affordability of the proposal.
The Treasury would divulge the nature of the tax increases only when Gordhan tabled the 2017-18 budget.
However, there is a sense that individual taxpayers are already overburdened, that SA cannot afford to increase the corporate tax rate if it wants to attract investment and that a hike in VAT will be politically unpopular.
Labour federation Cosatu has already warned that it will fight against any proposal to increase the VAT rate.
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