Gordhan’s tax-collection dilemma
26 November 2012
Posted by: SAIT Technical
By Prof Matthew Lester (Tax Talk)
LET us make a first attempt to predict Finance Minister Pravin Gordhan's budget speech next year: will we get a tax hike?
His medium-term budget policy statement (MTBPS) in October revealed that 2012-13 tax collections are more or less on track. But there are ominous indicators. At present, not even half the tax collection for 2012-13 is banked. The final outcome is hugely dependent on transaction-tax collections over the festive season and the second provisional tax payments due in February/March 2013.
Will the consumers play ball this festive season? Personally, I am not in the mood. The increase in the cost of travelling this year has got to me. And, unless the rand makes the biggest comeback since Lazarus, and oil prices plummet, that's not going to change.
The MTBPS also reflected a decline in corporate tax collections. A third of companies were in an assessed-loss position for the 2010-11 tax year. We will not know whether that improved in the 2011-12 tax year until mid-2013.
So if the South African Revenue Service (SARS) makes budget for 2012-13, it will be another fantastic effort. But can SARS squeeze another R100bn out of the same tax base with the same tax rates in 2013-14?
Unless President Barack Obama pulls a rabbit out of the hat by February 2013, the US will go into recession, and that will hit South Africa later in 2013. This, coupled with post-Marikana jitters, leaves little prospect that company tax collections will come to the rescue in 2013-14.
The logical solution to South Africa's tax dilemma is to increase the VAT rate. But if Cosatu jumps on the Gauteng road-toll issue, one can only imagine what would happen if there was a VAT increase. Broadening the tax base by implementing carbon-emission taxes is not only an inflationary move but the legislation is far from complete. So such taxes will have to come through fuel and electricity levies.
Although we do our best, there are simply insufficient drunks and tobacco addicts in South Africa to make a meaningful difference to tax collections.
Personal income tax collections were over budget for many years. But, with slightly lower wage increases and lower yields from share schemes, that trend is now gone. And an increase in personal tax rates for 2013-14 seems, right now, to be a reasonable prediction.