ZA Confidential Budget February 24th
What to make of the 2016 budget? Spending is being curbed and taxes are going up a bit, but no changes to the individual’s tax rate, to VAT and still no wealth tax. Lots of talk of savings, of reviewing spending, or fighting corruption. We have heard it all before. But some areas appear encouraging, and notably a high-level review of what is happening with our debt-ridden state-owned enterprises. There is to be a new Board at SAA, hopefully with a new chairman to replace Jacob Zuma’s lady friend incumbent. While the people of ZA are a vital audience, it is the ratings agencies who are being targeted with talk of belt tightening and what Minister Pravin Gordon called “fiscal credibility”. He, of course has to match the strictness of appeasing the ratings agencies with the political imperative that there are elections looming. One move is very welcome – a lower duty on SA Brandy, to help this struggling sector. Less welcome is a nanny-state tax on sugary drinks.
Here are a few of the more interesting announcements.
– GDP growth this year is forecast at just 0.9%, down from 1.3% last year
– Net national debt is due to stabilize at 46.2% of GDP in 2017/18, and to decline after that
– Investments of over R20 billion recently in the automotive sector
– The Budget deficit will be reduced to 2.4% by 2018/18
– Tax revenue will be R11.6bn short of the R1 081Bn earlier projected.
– There is a series of measures to contain government costs
– R18bn in tax increases for 2016/17, and a further R15bn a year for the two following years
– An extra R16bn to higher education over the next three years, with an extra R11.5bn on social grant allocations over the same period
– Comprehensive social security proposals will be released by mid-year
– General Fuel Levy to be increased by 30c/litre
– Personal income tax relief of R5.5bn
– Medical tax credit allowances to increase
– New tax on sugary drinks, and increases of 6% to 8.5% on alcohol and tobacco
– New tyre levy to finance recycling, increases in the light bulb tax, the plastic bag levy and the motor vehicle emissions tax
– Wealth taxes are under review
– Changes to transfer duty, capital gains
– New tax amnesty for 6 months from October for undisclosed offshore assets
– Further streamlining of public enterprises, with a look at a possible merger of SAA and SA Express
– Brandy reprieve: Historical changes in duty structure and regulatory requirements have led to brandy being at a competitive disadvantage relative to other spirits. To level the playing field, government proposes that a 10 per cent lower excise duty, based on litres of absolute alcohol content, be applied to pot-stilled and vintage brandy, and phased in over the next two years.
– The excise duty on sparkling wine has risen well above inflation in recent years, mainly due to the influence of high-priced imports. As a result, the difference between the excise duties on sparkling wine and still wine has increased substantially. It is proposed that the current difference between the excise duties on natural and sparkling wine be maintained by pegging the sparkling wine excise rate at 3.2 times that of natural unfortified wine.