The finance minister must tread a tightrope to fix the economy ashe prepares for next week’s budget speech
Many factors complicate the job of Finance Minister Tito Mboweni— from juggling politicians to placating the ratings agencies watching the treasury’s every move — and pressure is mounting on the minister to stabilise the country’s shaky economy.
Simply put, the government needs to collect more tax and to allocate it more efficiently. Additionally, urgent structural reforms are necessary in the form of reduced spending to restore confidence in the government’s ability to fix the economy. Peter Worthington, a senior microeconomist at Absa, said the public should expect tax hikes, one possibly being the increase of VAT by one percentage point, from 15% to 16%, although he cautioned that this is not a foregone conclusion.
However, Montalto said the treasury will be cautious when increasing taxes. “They worry that hiking taxes meaningfully would tip them over and screw with the rest of the revenue they are raising.” “Religious institutions are required to register with the Sars tax exemption unit as a public benefit organisation [PBO] before it can claim the relief that comes along with being a PBO.
“I do not think they will be able to cut the wage bill this year because the unions have already said the current wage bill is sacrosanct and they will not have any alteration to the terms of the current wage deal,” said Worthington.
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