When the Finance Minister gets up in Parliament next week to read the Budget speech, it would be marvellous if he chanted to honourable Malema, “Pay us the money, pay us the money.”
When the Finance Minister gets up in Parliament next week to read the Budget speech, it would be marvellous if he chanted to honourable Malema, “Pay us the money, pay us the money.”
Nhlanhla Nene will be doing no such thing.
Instead, we will once again be treated to a rather dry view of the government’s financial planning for the year, delivered in South Africa’s 12th official language, that of economics.
So what does it mean to the ordinary person trudging to Checkers or Pick n Pay for the weekly shopping? First of all, the speech will be selective.
The Budget unveiling is also a political affair, like the State of the Nation Address, because it involves identifying where the money will come from for the promises made in the President’s speech to the nation, such as the R23 billion promised to help Eskom.
In the Budget speech, what is highlighted – the successes, the “challenges”, the spending on this and that and the other thing – is less important than what is left out: the lack of spending on this or that or the other thing.
For some of that, we can rely on experts who will comb through the Budget Review, the thick document that accompanies the speech and is thankfully now online and downloadable as a PDF.
Much of the spending plans were already announced in the Medium Term Budget Policy Statement or “mini-Budget” in October last year.
Still, further detail may be available in the Budget itself.
Some have been waiting impatiently for greater detail on how important changes to health policy will be funded.
Others want to see how much money will go to land reform. Most of us would like to know where the money is going to come from to keep the lights from going off too often.
In a nutshell, government can find the money it needs in a few ways.
Mostly, however, it has two choices: tax or borrowing.
The amount to be borrowed is determined by how much government thinks it needs to spend to keep the people happy and the country functioning and how much it can bring in from tax.
We already know that the government needs to cut this figure so that we don’t end up in a debt trap or make suspicious foreigners charge us more for new debt we raise.
So tax looms large in this budget, because government has not been able to get as much tax as it was getting before the global financial crisis of 2008-2009.
And we already know from the mini-budget that it needs around R44 billion more in tax revenue over the next three years.
This financial year alone it plans to get at least R12bn extra.
The extra tax money can come from several sources.
The most obvious is to raise VAT.
VAT is easier to collect and harder to evade than other taxes.
By one estimate, raising VAT by one percentage point (from 14% to 15%) could bring in around R20bn extra.
This will upset the unions and political groupings to the left of the ANC to the point of mass protest, and there is an election coming up.
However, it has to happen sometime, since we lag behind other countries in VAT.
Personal income tax is a harder, because money that goes to tax can’t be spent by consumers.
In a climate of poor growth, raising tax can make life harder by hitting the economy generally.
Taxing the rich may seem like an easy option, but the reason South Africa has so many tax experts is that the rich can pay for effective advice on how to avoid tax.
Corporate income tax is even harder.
Corporations cannot be relied on because even when they make a profit they have ways of arranging their affairs so that they don’t pay what they in theory should pay.
Putting up the fuel levy is easy, and there may be other smaller taxes to raise.
Sin taxes will inevitably increase. These will help, but won’t bring in the full amount.
One option is not to adjust the tax tables to catch up with inflation.
Individuals who are not actually earning more are taxed more.
This becomes punitive when an inflation-related increase pushed your salary into a new, more highly taxed, bracket.
My guess is that the Minister will go for increases on a range of taxes, though union opposition may rule a VAT increase out, unless it is accompanied by heavy tax increases for wealthier South Africans.
That’s dangerous too.
Popular belief is that revolutions always involve the poor, but, as any schoolboy or schoolgirl knows, the French Revolution was the work of the bourgeoisie.
The e-tolls debacle in Gauteng is already proof the middle class can stage a tax revolt, and it may not stop there.
