There’s no doubt about it: the government needs more money. It has taken its time in asking for it and it seems inevitable that on this occasion most of us will be squeezed out of our hard earned money. If government were to increase taxes to cover its expenditure, it could potentially worsen an already volatile situation, with people unhappy about paying for services that they do not see the results of.
In some instances there have already been cases of revolt with people refusing to pay. For example, the e-toll system in Gauteng, which has faced a lot of criticism from the public, with a vast number of people not paying their e-toll bills.
Ettiene Retief, SAIPA chairperson of the National Tax and SARS Stakeholders Committees believes that if taxpayers see actual results coming out of the Budget Speech that have a positive effect on them, such as action taken to combat corruption and a more strategic action plan for the spending of their hard-earned money, it could go a long way in boosting public opinion and willingness to pay taxes.
“A genuine focus on eliminating corruption and ensuring that money spent gets the right results will go a long way towards solving the problem at least in the short term. However, the long-term solution is to find ways of stimulating economic growth and the required infrastructure to create sustainable jobs and thus broaden the tax base and increase the taxable income of taxpayers,” he added.
The Budget Speech looks set to be a bleak message for the public in the short run. Most of the announcements that will be made will have an adverse impact on the public’s wallet – the only question is how much?
“The good news is if they balance the budget and get rid of their deficit, the budget is more credible. People won’t see interest rate hikes and you won’t have a downgrading on the debt. Even though [this in itself] is not a good news story, it’s better to make sure that our debt situation is not downgraded again otherwise we are going to see really bad news. The way people should look at the budget is to view the tax increase as a less bad [option] of the two alternatives,” added Keith Engel, deputy chief executive at the South African Institute of Tax Professionals (SAIT).
But not everyone believes things will dramatically change. “Overall, I don’t see many dramatic unexpected changes due to the fiscal climate, but given the needs of South Africa, I really do hope we see a growth-positive budget and not just more of the same,” said Marc Sevitz, director at TaxTim.
Perhaps the government will have a reason to stall giving us taxpayers the ‘bad news’ after all. An increase in VAT will after all be a bitter pill to swallow for most just ahead of the 2016 local elections.