News Column

prepare for harder times

February 21, 2014



Joseph Booysen

BUSINESS REPORTER

TAX EXPERTS have warned of further misery for consumers already hit by an interest rate hike and two petrol price increases this year, after the Budget is delivered on Wednesday by Finance Minister Pravin Gordhan.

Ettiene Retief, tax expert and chairman of the national tax stakeholders committees at the South African Institute of Professional Accountants (Saipa), said tax experts expect even more increases to be put into effect after Gordhan's Budget speech.

He said South African taxpayers should expect tax increases in the short to medium future.

Retief warned that even if none of these predictions were realised, recent increases in living costs dictate that consumers have no choice but to change their spending habits.

"The delayed gratification of sufficient savings has a lot more longevity, and offers more security, than the fleeting satisfaction of 'keeping up with the Joneses', by spending money you don't have on status items.

"Consumers are urged to spend in ways that are sustainable. It is most probably not the last time that rates and fuel costs increase."

Rob Cooper, tax expert at Sage VIP, said the burning question for every employee was whether personal tax rates will go up or down.

Cooper said as far as increasing tax rates was concerned, the general expectation was that tax rates would be lowered, but only enough to cater for inflation increases.

He said last year the personal income tax relief for individuals amounted to R7 billion.

"In our current times of financial stress, one wonders whether this can be repeated in 2014."

Kevin Hurwitz, chief executive of Wonga.com, said: "I don't expect any massive announcements from the Budget this year, given that it's before the general elections. I believe it's absolutely vital for the Minister of Finance to present the message that South Africa is 'open for business'.

"Local and foreign investors need to be reassured that the country is a good place for them to invest time, money and resources."

Hurwitz said unemployment and poverty continued to be a challenge in South Africa but no attempts at alleviating these by the government would prove fruitful until corruption was eradicated at every level, starting with government and the civil service .

Dave Mohr, chief investment strategist for Old Mutual Wealth, said the Budget speech was essentially about four areas for South African investors: how much the government expects in tax revenue, how much it plans to spend, how it will divide its spending between competing priority areas, and how much it will need to borrow should there be a deficit.

Mohr added that government was eager to encourage savings, particularly retirement savings.

"Government has been introducing measures to improve the attractiveness of retirement fund contributions and could be looking to change the way interest income is taxed."

He said slower government spending growth could also affect the South African Reserve Bank's interest rate decisions, and result in less aggressive interest rate hikes.

Craig Aitchison, general manager of customer solutions at Old Mutual Corporate, said small businesses played a significant role in job creation, poverty reduction and economic growth.

"It is therefore crucial that next week's Budget speech tackles the growing financial burdens and concerns of the SME (small and medium enterprises) sector, which includes tax and regulatory measures."

He said AfricaGrowth Institute research showed the key problems most SMEs encountered were government taxes and regulations, red tape and the cost of regulatory compliance.

Aitchison said last year Gordhan indicated in the Budget that the government was working to simplify tax requirements for small businesses.

"Based on the 2013 Budget indications by Treasury, we expect Minister Pravin Gordhan to express a continued interest in simplifying tax requirement for small business this year."

joseph.booysen@inl.co.za

Cape Argus


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Source: Cape Argus (South Africa)


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