More bang than you might think …
At first glance, February 24’s 2016 Budget speech by Finance Minister Pravin Gordhan lacked the sort of radical or dramatic shifts that make for hot headlines and sexy soundbites, but a closer inspection of Gordhan’s deft balancing act revealed some almost bold steps among the fancy footwork.
When an apparent lack of bold action was pointed out to Gordhan in a press briefing, he quickly noted that the shift in deficit numbers could be described as radical.
With the responsibility to prevent the loss of South Africa’s investment grade credit rating weighing heavily on him, Gordhan vowed to speed up fiscal consolidation and bring the deficit down to 2.4 percent of GDP in 2018/19.
He noted that this meant reduced spending plans and higher revenue targets and a lot of effort to impose pain on “ourselves” — that is government — rather than on ordinary South Africans.
“We are not imposing austerity on our people!”
Making a point that would normally be given high points for sexiness in the business world, Gordhan said the budget outlined a lot of work that was being done to build relationships between government and business. He added that in the weeks to come, the fruits of these efforts would become obvious in the form “of concrete areas of co-operation”.
Holy Cow!
Another area where bold action was in evidence, according to Gordhan, was state-owned enterprises (SOEs), where he said it had now been established that parastatals were “not sacrosanct”. The budget showed that the government was “willing to take a tough look” at how these were performing and would proceed to ask which of them were no longer needed.
Julius Who?
One of the surprises of the day was Gordhan receiving praise from the man in the red jumpsuit.
Economic Freedom Fighters leader Julius Malema called on South Africans to rally around the minister who had done what was needed to avert the country losing its investment grade credit rating.
“The minister came to present the budget at the most difficult time. It is time we put aside political and ideological differences and show a sign of unity,” he added.
He particularly noted the amnesty for the declaration of offshore assets, saying it appeared that it seemed that Gordhan had taken heed of advice in a letter the EFF sent him this week.
Lack of drama
When asked why his party was prepared to listen to Gordhan, who was appointed by President Jacob Zuma, after they had disrupted proceedings being booted out of Zuma’s state of the nation address earlier this month, he noted very clearly that: “Pravin Gordhan was not appointed by Jacob Zuma. Zuma wanted Van Rooyen.”
He was referring to Zuma’s (embarrassing) comment earlier this week that he believed David van Rooyen was the most competent person to head the National Treasury.
I am liking Mr Malema more and more.
Gordhan trims here, slashes there, as he hastens fiscal consolidation
Gordhan emphasised during Wednesday’s 2016 Budget speech that additional spending on higher education, small business development and amounts set aside for responding to the drought and other contingencies would be accommodated through stringent cost containment measures across all government departments.
Gordhan earlier said that South Africa had moved from trimming here and there in the haircuts so popular in the lingo of 2009, through a period where the focus was on expenditure ceilings to today’s “next stage” of taking “a tough and close look at our programmes”.
“We are moving on to a third level and planning to take a tougher and closer look at our programmes,” he told a media briefing shortly before he tabled the Budget in Parliament.
All stages seemed to be included in his description of government cost-cutting plans.
Gordhan gave further detail on belt-tightening initiatives referred to by President Jacob Zuma in his State of the Nation speech earlier in February, which might be described as haircuts all round. Zuma had taken particular aim at a variety of items, such as state-funded banquets and international travel junkets.
Gordhan said cost containment measures would include restrictions on filling vacancies, a national and accommodation policy and instruction on conference costs, as well as new guidelines to limit the value of vehicle purchases for political office-bearers to R750,000.
Taking aim at bigger ticket items, Gordhan said, all contracts above R10 million would be reassessed to ensure value for money.
He added that use of the new e-tender portal would be mandatory, thereby enforcing procurement transparency and accessible reference prices for a wide range of goods and services.
He also said that new centrally negotiated contracts would be put in place for banking services, ICT infrastructure and services, health technology, school building and learner support materials.
This war on wasteful spending by government at all levels was not merely a cost-cutting exercise, he said, adding that well-managed public administration reforms offered broader opportunities.
Sinfully sweet
A tax on sugary drinks makes perfect sense! It should be a nice little earner for Treasury and who knows maybe the added cost will turn the junkies off additive and sugar-laced fizzy drinks and on to fruit juices, of which SA has a most delectable selection.
Time to sell the house in Monte Carlo?
In the 2016 Budget speech, Finance Minister Pravin Gordhan announced a special voluntary disclosure programme aimed at encouraging South African taxpayers to disclose offshore assets and any past contraventions of exchange control laws.
Many taxpayers with undisclosed assets held abroad will likely be aware that the net is already closing on them, with the new global standard for automatic exchange of information between tax authorities due to come into effect in 2017.
The new standard, which was initiated by the Organisation for Economic Co-operation and Development, would mean that the South African Revenue Service (Sars) would automatically receive information on defaulters.
The amnesty, announced on Wednesday, in effect for a limited window from October 1 2016 to March 31 2017, is designed to encourage individuals and companies to regularise their tax and exchange control affairs voluntarily.
Successful applicants will be required to cough up a proportion of the taxes that would have been due as well as to pay a levy on the value of offshore assets. In exchange they would be granted immunity from prosecution as well as relief from penalties for understatement, which can be up to 200 percent.
It was not clear in the Budget how much money was thought to be offshore or even how much Treasury hoped to repatriate, but it is not likely to be insignificant. As Gordhan told journalists in a pre-Budget briefing: “The very rich are very creative.”
Added to the threat of involuntary disclosure that is on the horizon, tax defaulters have also been rattled by leaks of files last year showing how at least one Swiss bank helped foreign clients dodge taxes. In the light of this pressure, the Tresasury is hoping that some defaulters might be ready to confess, pay their bill and move on.
While the automatic exchange of information programme is not likely to bring all defaulters into the tax net it will certainly make it a lot more difficult to keep one’s foreign assets below the radar.
The additional note that the exemptions exclude individuals and companies who were already aware of an audit or investigation or that one was pending might add a little extra pressure to come forward now or face much more aggressive corrective action later.
– African News Agency (ANA)