Disappointed tax experts say Gordhan tried to walk fiscal tightrope
26 October 2012
Posted by: SAIT Technical
By Amanda Visser (Business Day)
Executive summary (SAIT Technical)
Tax experts are disappointed that there are no plans to stimulate the economy, investor confidence and private sector investment and thereby increase tax revenue over the medium-term. The main factor leading to the downward adjustment of tax revenue was the lower than expected tax income from individuals and companies. Collections from VAT and customs duties had been adjusted upwards.
TAX experts on Thursday said they were disappointed by the lack of concrete plans to get the economy to grow at levels that would increase tax revenue over the medium-term expenditure framework.
Finance Minister Pravin Gordhan had "stoically” stuck to fiscal and tax policy in the face of concerns about growth and revised his projected tax collections conservatively downwards by R5bn to R821.4bn, said Nazrien Kader, leader of Deloitte's tax services.
"He did indeed walk the fiscal tightrope, trying hard to balance the need for additional stimulus for the domestic economy against the need to curb spending to reduce the budget deficit,” she said.
Mr Gordhan did warn that if economic conditions deteriorated or disruptions in the mining sector continued much longer, it would be necessary to announce a further downward adjustment to tax revenue. The revised estimate for total tax revenue for 2012-13 is R821.4bn with revised total budget revenue, including non-tax revenue, of R900.6bn.
Eugene du Plessis, a tax director at accounting firm PKF, said although the R5bn downward adjustment of tax income was not a crisis, there were no innovative plans to bolster investor confidence and stimulate private sector investment. On the other hand, it was positive to hear that there would not be an expansion in government expenditure over the remaining period.
The main factor leading to the downward adjustment of tax revenue was the lower than expected tax income from individuals and companies. Collections from value-added tax (VAT) and customs duties had been adjusted upwards.
Tax income from individuals is put at R282bn, almost R4bn less than what Mr Gordhan budgeted for in February. Corporate income tax will be R1.7bn less than the R167.8bn budgeted for in February.
In contrast to the declining tax income from individuals and companies, revenue from VAT was expected to increase by R2.3bn in the current year to R212bn. Customs duties were also revised upwards, from R36.1bn to R38bn.
Gross tax revenue collection was expected to remain subdued next year, Mr Gordhan said, but should improve in the outer years of the expenditure framework as economic conditions strengthened.