SAIPA welcomes Mid-Term Budget, calls for more focus on growth
The South African Institute of Professional Accountants (SAIPA) has broadly welcomed the Mid-Term Budget tabled in Parliament today by the Minister of Finance, Pravin Gordhan, but has called for a greater focus on growth.
“The Minister’s focus on cutting government extravagance and reallocating spend to areas where it’s needed will strike a welcome chord with taxpayers,” says Ettiene Retief, chairperson of the National Tax and Stakeholders Committees at SAIPA. “What we’re looking for now, though, is a smarter focus on spending, one that will promote growth and expand the tax base.”
Retief says that while it is good news that the 2013-4 deficit target will be met, and the deficit reduced over time, projected growth rates remain too slow. One way to improve things would be to spend in such a way as to expand prosperity and so strengthen the fiscus.
“It’s good to be taking measures to ensure that government gets value for its money, but we need more: spend on infrastructure that grows the economy is vital,” he argues. “Too much of the tax burden is carried by too small a number of individuals. It’s great to spend money on social upliftment but we have a disproportionate spend on social grants, which do little to promote sustainable economic growth.”
The level of corporate tax collections should come as no surprise, Retief adds, citing the impact on profits of uncontrolled strikes, reduced foreign investment, the economic status, and a volatile currency. “Because it’s only profits and not revenues that are taxable, government needs to pay greater attention to providing conditions that enhance corporate profitability if it wants more tax,” he says. The same profit seeking by companies that are criticized is the base for corporate tax, and a key factor to securing capital and investment.
In the current climate, big businesses alone are not in a position to make a dent in high unemployment figures. However, as Retief points out, the small and medium-sized business sector can make a significant impact with regards the unemployment rate, and needs to be encouraged. One way would be to improve still further government’s ability to pay small-medium suppliers timeously. The various initiatives implemented by the DTI and the work done by the Davis Tax Committee should yield positive results with regards small-medium businesses and the role they can play in the country’s economic growth.
“Reallocating money and getting value for it are not enough—we have to ensure that the spend is correctly applied to yielded the expected results,” Retief concludes. “Aligning spend with the National Development Plan is a good start, but we need more detail.”