Will Increasing income tax affect economy negatively?

By Drum Digital
26 February 2015

Increasing income tax for individuals will have a negative effect on economic growth, says union United Association of SA.

Increasing income tax for individuals will have a negative effect on economic growth, union United Association of SA said on Wednesday.

"Increasing personal income tax will have a negative effect on the growth potential of the economy," the union said in a statement.

"Economic growth will be lower because of the multiplier effect."

Finance Minister Nhlanhla Nene should have cut state expenditure deeper.

"The good Minister has not delivered on a budget that the country needs at the moment, the economy is going to be left vulnerable because of state debt," the union said.

Nene announced a one-percent increase in income tax for middle and higher income earners, which was expected to add some R9.4 billion to the fiscus.

In total, tax and levy increases would generate R16.8bn but about half of that would be given back to those earning less than R450,000 through a range of measures including tax bracket inflation adjustment.

The fuel levy would increase by 30.5c/litre, which would add a further R6bn to the state's books.

Source : Sapa

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