The Medium Term Budget Policy Statement ‘MTBPS’ or ‘mini-budget’ takes place in Parliament on Wednesday afternoon this week and there is hardly a murmur in the press or social media. One wonders how many will tune in?
True, there will be no announcements on tax rates. True, the state of tax collections is difficult to assess only 6 months into the tax year. True, Minister of Finance, Nhanhla Nene, will have to downgrade this year’s growth forecasts to below 2%. This is all music to slit your wrists by.
The most important aspect of this year’s MTBPS is its continuation from last year’s theme. Remembers Nene’s famous words on 22 October 2014 ‘‘The choice we face in considering these proposals is a difficult one. But we believe that this course can no longer be postponed.”
Those few words heralded a substantial change in the tax outlook of RSA. They were an admission by National Treasury that the current tax base of RSA was insufficient to provide for the future. And that tax increases would be inevitable.
By September 2014 South Africa’s national debt trajectory showed no end. All the hopes of recovery through increased economic growth were dashed. And a new fiscal package had to be adopted.
Figure 1: Net National Government Debt,2007/08 – 2020/21
Back in October 2014 Nene’s call was to increase tax collections by R15bn pa and decrease state expenditure by R15bn pa.
By February 2015 the numbers were revised upwards to increase tax collections by R17bn pa and decrease state expenditure by R25bn pa. And taxpayers took a knock in the solar plexus in the form of a 1% income tax hike and a 80,5 cents per liter fuel levy increase.
So what Wednesday afternoon is all about us getting to the bottom of the crucial questions:-
- Were the fiscal strategies of 2014 enough to curb the national debt trajectory?
- What’s the plan to keep RSA going for another year?
- How likely are further tax increases in February 2015?
That’s enough to grab my attention. Even if Oscar has reached it to the safety of Arnold’s mansion by then.