Was there any news for taxpayers in MTBPS 2015?

In February 2013 Oscar Pistorius knocked the national budget speech off the front page of the newspapers.

Barry Roux achieved the same thing in February 2014. So now with Oscar safely back in Arnold’s palace I thought we could actually achieve something by writing about MTBPS 2015.

We thought the MTBPS would be about Finance Minister Nene. Not Education Minister Blade Nzimande. How easily we digress. For Nene to be able to even present the MTBPS was a significant achievement displaying remarkable composure. I doff my hat, Mr. Minister.

So, what did it all mean for the taxpayer?

The tax collection forecast for 2015/16 is only R7bn off target. That’s magnificent news and shows that tax collections are more robust to a poor economy than we ever believed.

Tax collections are always reported as being below target at MTBPS. It’s where they stand on budget day in February 2016 that will count in what is to come for taxpayers next year. So there is not much news there.

The national debt trajectory has not completely leveled off as forecast in MTBPS 2014. But it has slowed a bit. We are making progress. The question is thus’ will this be enough for the international rating agencies?’ The Rand must remain vulnerable and represent a bigger threat to real personal wealth than any news on the tax front.

Will there be another tax increase in 2016? The fixes prescribed in MTBPS 2014 extended over a 5-year period. So the 2015 increases could never be viewed as a once-off adjustment.

So, if there is to be a tax increase next year, where is it going to come from? We got no hard answers on that from MTBPS 2015.

Nene has asked for more advice on wealth taxes. That’s not news either. Rock star economist Thomas Piketty was in RSA a couple of weeks ago and the top order of the ANC were taking front row seats. This was followed by a resolution at the ANC GNC to further investigate wealth taxes.

The Davis Tax Committee has already reported in its first estate duty report that wealth taxes will never be the silver bullet to RSA’s problems. International experience is that they never yield much and probably never will.

So the wealth tax debate will continue. But it will take years to implement anything substantial. As Piketty inferred we don’t even know where the wealth is. The implementation of wealth taxes will definitely not save us from other income tax increases next year.

Nene made some remarks about tax evasion, Base Erosion and Profits Shifting ‘ BEPS’ and , probably, more importantly, information sharing agreements between international tax authorities. Few took much notice. These comments are routine. Be careful now.

In tax circles EVKOM has nothing to do with electricity shortages. It is an acronym  for ’EK VAT KONTANT ORRSEE, MENEER’. Or what has been RSA’s third national sport of schlepping cash out of RSA to undisclosed accounts in various exotic destinations.

In the offshore amnesty of 2004 RSA sanitized billions hidden aboard. But there can be little doubting that the game didn’t stop and everyone came clean. The game continues.

This year we witnessed the HSBC debacle and a handful of wealthy South Africans were in a tight spot if they didn’t immediately run for the voluntary disclosure program. That’s the tip of the iceberg that is quickly melting.

My serious advice is  ‘IF YOU HAVE AN UNDISCLOSED OFFSHORE STASH, EITHER LEAVE RSA AND JOIN IT, OR START DOING SOMETHING TO CLEAN UP THE MESS!’

Some threaten to leave but the stark reality is that most counties have policies that stand in the way. ‘ No pets and no pensioners’ is the Australian call. Most are to old to leave. Unless they want to take a rubber duck ride to Lesbos, that is.

But I don’t think cleaning up the offshore stash is going to save is from a tax increase next year.

Some predicted that National Treasury would implement carbon tax to fill the tax gap in 2016. The papers have been on the table, running hot and cold, for some time.

Nene has announced that there will be a further opportunity to debate the proposed design of a carbon tax, when the draft bill is published for comment later this month. This forms part of a package of measures which Minister Molewa will take to the United Nations Climate Change Conference later this year.

So Carbon tax is still on the agenda. And it will probably gain further support from the United Nations Climate Change Conference. And the OECD is very much in support of it.

But it’s the wrong time to hammer South Africa’s week economy with Carbon Tax. So carbon tax implementation, although likely, is unlikely before 2017.

So, through the simplest process of elimination one can formulate the following predictions

  • Nene needs more tax, increased growth rates are not going to do it
  • Nene cannot borrow more in real terms.
  • The news that featured in MTBPS 2015 isn’t going to bring Nene much in 2016
  • Increasing corporate tax rates will achieve very little
  • If VAT is increased the protests at parliament yesterday will seem like child’s play.
  • If the oil price stays below $50 per barrel maybe there is some space to get some more fuel levy, but much of the benefit has been lost due to a weakening Rand.
  • So that leaves personal income tax increases.

But I may be wrong again.


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