Finance minister Pravin Gordhan is widely considered to be a sound fellow who understands the budgetary process and fights theft and corruption, but nevertheless he is a member of a socialist government infested with communists and unshaken in the belief that politicians know best how to spend everyone’s money. The budget he presented this week seems to have passed a watershed in the expression of this belief. It has substantially ramped up the confiscation and punishment aspects of state revenue collection with savage attacks on capital, whether the so-called white monopoly kind or not.
The headline grabbing increase of the income tax marginal rate to 45% is expected to collect an extra R4.4bn from the just 103 353 taxpayers who have an annual income more than R1.5m. Provided a few of them are prepared to stand on the grass, this tiny group could fit into a football stadium, which dramatically illustrates the flimsy nature of our tax structure. The total income tax contribution of these amazingly few successful souls is around R127bn, which is more than a quarter of the budgeted amount from that source! It’s worth remembering that almost half of the 14m registered individual income tax payers contribute zero because their income is below the tax threshold. They do not of course escape the many other levies and duties and taxes.
Getting rather less coverage is the 33% increase in the withholding tax rate on dividends. This is just the latest tightening of the screws on those who have savings to invest. A decade ago the 10% Secondary Tax on Companies (STC) was commuted into a Withholding Tax on Dividends and increased to 15%. Since Wednesday that rate is now 20%. Most companies conveniently “forgot” to pass on the benefit of this change to their shareholders who were now responsible for paying the impost and post-tax dividend flows were severely impacted. It has now got even worse.
The Budget also confirmed that taxes on carbon and sugar are on the way and that the VAT rate of 14% may not be as sacrosanct as imagined. Make no mistake our government are desperately looking for sources of income and if anyone could find a way to tax oxygen they would be all over that idea in a flash. But the real threat to our nation is the totally out of control corruption, theft and maladministration that results in inappropriate and fruitless expenditure.
Events around the campaign to replace Gordhan because he is “insensitive to the needs of the people”, are hotting up. A compliant and corrupt buddy of JZ has been fast-tracked onto the reserves bench. But it reveals that the campaigners have no idea how state finance works nor what a parlous condition ours is in. National Treasury is not a serene haven of cash-filled vaults ripe for looting. Almost every cent that it handles has a destination agreed to by Cabinet. It’s called the Budget. This defines exactly where Treasury must next year allocate an average of R6bn every working day. It also forecasts that SARS will collect on average of less than R5bn a working day. So, another Treasury task is to find out from the Reserve Bank regularly if the shortfall has been borrowed and at what cost. Meanwhile the switchboard is alight with calls from the likes of SAA and Eskom asking for a bit to tide them over. And now, arbitrary mendicants claiming to represent the people and clutching a chitty signed by Number One plan to knock on the front door and be handed a bag of dosh. The first (and only) question any Finance Minister should ask before turning them away is: From which account do they propose diverting their own pay-out? Perhaps National Treasury should keep at reception copies of a map marked with the location of the various Ministries so that prospective budget looters could more easily locate the civil servants to explain to them why they won’t be paid this month.
Just roll over and get a few more minutes doze and you’ve missed the cricket from NZ. These time zone thingies are unfriendly. But it does mean that the lengthy 2017 Super Rugby season is now underway before our own weekend begins. Nevertheless, the format does create a ridiculous calendar with many Saturdays offering 7 matches back to back. Good for sports bars. Poor for marital relations.
Friday 24th February 2017