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Budget, finance and the prediction game


by Desi Tzoneva on 17 February 2010

In a few short hours, our captain of finance will give us the lowdown on the country’s state of financial affairs. The ‘do’s’ and ‘don’ts’ of 2010; where we’ve been; and especially, where we’re going. One of my favourite times of year is February, where I can privately enjoy these national treasures with some wine. Whatever is said is food for thought with profound impacts on the economy (both in the short as well as long term). Despite my slight economics-fetish being perceived as abnormal behaviour by my colleagues, I love the whole experience. One of the best parts for me is the predictions!

What I find most interesting is two main trends. On the one hand, the variety of specialists out there make you think you should expect an equal number of opinions. What happens many a time though, is that these guys talk about the same issues. On the other hand, they can also broaden the discussion so much that you start thinking we’re not talking about the same country anymore.
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Once again this year, we will hear a lot of these voices. The most prominent so far have been, according to FAnews Online’s latest article, are the following:

Old Mutual Investment Group South Africa (OMIGSA) says this year will be a ‘balancing act’ between reducing the deficit while at the same time not choking off the economic recovery. In addition, SARS this year, is not expected to meet its collection target by R75-billion.

PriceWaterhouseCoopers SA’s (PWC’s) focused on the benefits to individual taxpayers of previous tax cuts. Low income groups have been the most obvious beneficiaries so far and tax relief to low income earners is expected yet again, however, at the expense of middle and high income earners. Moreover, a massive job creation drive is perceived as the way forward. Government’s public works programmes aren’t creating the ‘calibre of income earner required to lift the country out of poverty’. Unemployment needs to be reduced by creating high-paying employment rather than placing brooms and pick axes in workers hands for short periods of time.

OMGISA focused on the following: although lower income earners can still expect some tax relief, this will come by way of adjustments to tax brackets to compensate for ‘bracket creep’. It also said there is a possibility of an increase in the top marginal rate of tax. Revenues could be boosted by a move that sees increases in excise duties; the fuel levy; capital gains tax; and a possible introduction of an electricity tax.

Audit firm KPMG, included the 2010 FIFA World Cup into the equation by saying that addressing the post-2010 infrastructure environment - physical and economic - is a key challenge that must be addressed.

Meanwhile, FAnews online Editor, Gareth Stokes, said that although he expects VAT and corporate income tax to remain unchanged, he wonders whether South Africa’s “revenue salvation lies in hiking VAT.”

As far as I go, hey, I’m just putting my feet up and waiting to see. Predictions are one thing (and tend to come mainly from the private sector). This, however, is a government speech and it will be interesting to see how the national budget will attempt to balance the party’s public priorities and interests from the private sector. At the end of the day, the priorities are all good, but the outcomes – a big area of concern – are the metre I will judge by.




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