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Gordhan on tax: incentivise saving, discourage waste

28 June 2012   (0 Comments)
Posted by: SAIT Technical
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By Donald Pressly (Business Report)

Finance Minister Pravin Gordhan would not be drawn yesterday on whether the 2013/14 Budget will include a raft of new taxes, including a carbon tax that is under study.

He also would not say whether he supported a tax on super-profit as proposed for the mining sector in a document being discussed at the ANC policy conference.

"Let us see where we go,” he said simply. With reference to the carbon tax, he said: "Everyone says if you want to manage behaviour you have to price behaviour… and attach a price for the wrong kinds of behaviour.” Carbon taxes were one form of such pricing, he argued.

Environmentalists, of course, supported such a tax wholeheartedly, he noted. "They say it is a good idea… let us get the carbon tax going. On the other hand carbon-emitting industries are saying this is the wrong time to do something like that.”

Not keen to tread on the territory of the relevant ministers, he said South Africa had large coal reserves, but this form of energy had problems.

When determining whether to impose a carbon tax, the government had to "balance all these factors out” and determine what was the best thing to do "at this point”.

Noting "a sluggish recovery” locally from the last recession, the Treasury had to be careful what "kinds” of taxes the state needed to impose.

In his address to the Progressive Business Forum, which has a large stand of business displays at the policy conference at Gallagher Estate in Midrand, Gordhan said the aim of his ministry was to create better conditions and lower the costs of doing business.

This applied to tax provisions and compliance, particularly for small business. Good work had been done in this regard but "there is much still to be done to ensure growth”.

The debate continued about the extent to which the state and lenders should fund entrepreneurs.

Noting that there had been a moderate rise in government spending since the end of the recession in 2010, mainly to boost infrastructure and encourage job creation, Gordhan said a number of factors were constraining the economy. These included insufficient transport infrastructure and power shortages, especially at mines.

Another key constraint of the economy was the low level of savings. Gordhan hinted strongly that the Treasury would take measures to boost confidence in savings mechanisms in months ahead.

"Clearly a lot more needs to be done to promote savings,” he said, acknowledging that there were "structural constraints” in this regard "given poverty levels in South Africa”.

He expressed concern about this low savings level as it resulted in South Africa's "dependence” on foreign savings "to balance our books”.

Amid calls for tighter government control over monetary policy from alliance partner Cosatu as well as elements of the ANC Youth League, Gordhan said that the rand had been volatile recently. But it had tended to track the euro in recent months, which in turn determined "the rand's fate”.

"Our good fortune is that oil prices have come down (recently), which has mitigated the depreciation of the rand.”

On the plus side, the depreciation had been good for local exporters. "Exporters are in a more competitive position,” Gordhan said.


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