No tax shocks, please

2011-12-05 14:59

There should be no tax shocks in next year’s Budget which could harm business, Business Unity SA (Busa) said today.

“Given the vulnerability of the economic recovery and the uncertain global situation there should be no tax shocks in the Budget which would damage business confidence and harm growth potential,” Busa deputy CEO Raymond Parsons told media in Joburg.

“The economy is already feeling the negative impact of the proliferation of ‘stealth taxes’, administered prices, and user charges.”

Government should focus on keeping its spending under control and ensure that when it did spend, the money was used to boost growth and reduce poverty.

Parsons was delivering Busa’s outlook for business in South Africa next year.

He warned that welfare payments could not continue to grow out of proportion to tax revenues.

“Either strengthen public sector delivery, keeping government affordable and the tax burden reasonable, or face a continued failure to ensure delivery.”

Busa appreciated the increase in public investment in infrastructure – from R67.5 billion in 2005 to over R140 billion now.

Parsons called for more partnerships between the public sector and private companies to speed up the delivery of infrastructure.

“Major service delivery backlogs at local government level – combined with inefficient and costly state-owned enterprises – are significant growth constraints that impact on job creation.”

Parsons said government had made marginal provision for the use of private public partnerships (PPPs).

The value of infrastructure delivered by PPPs peaked at 5.9 percent in 2009/10 but was set to decline to a mere two percent in 2012/13, he said.

“In view of the urgency... let’s see whether we can make these PPPs work for us,” Parsons said.

Busa had lowered its economic growth forecasts by about 10% and now expected this year’s GDP to be 3.1%.Next year, it expected growth of 3%, and in 2013, it forecast 3.8%.

The South Africa economy was underperforming, Parsons said.

“At this rate it will take South Africa much longer to reach its job creation and other socio-economic targets.”

Busa expected the volatility in the exchange rate to continue for a while, inflation to hover at the upper end of the target range, which is between three to 6%, and interest rates to remain unchanged for the time being.

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