Supplementary Budget 2020

Budget 2018: Concern about increase in state spending - OUTA

Cape Town - The Organisation Undoing Tax Abuse (OUTA) is concerned about the practical implementation of the promises made in Budget 2018.

Ben Theron, OUTA’s chief operating officer, said in a statement in reaction to Finance Minister Malusi Gigaba's Budget 2018 announcement, that the organisation is concerned about what it deems to be a significant increase in state spending.

This includes an increase in the cost of the executive.

"Minister Gigaba hasn’t given us a comprehensive plan to eliminate systematic corruption or even a budget for the already running commission of inquiry into state capture," said Theron.

In OUTA's view Gigaba is merely making "vague promises without giving clear action to implement them".

OUTA agrees that the extension of guarantees for state-owned enterprises (SOEs) such as Transnet, Eskom and SAA, is necessary for stability, but claims it fails to address plans to rebuild these institutions and stop future guarantees.

"The hints of privatisation of SOEs is encouraging and, in this regard, SAA should be disposed of as soon as possible,” said Theron.

In his view, Gigaba has missed an opportunity to shed light on plans to get the SA economy growing again.

"The vague statements on the stabilisation of balance sheets of SOEs provide no certainty or confidence that further bailouts will be avoided," said Theron.

It regards the recapitalisation of the SA National Roads Agency (SANRAL) as underlining the failure of e-tolls, for instance.
 
"OUTA is disappointed at the lack of clarity on government's commitment to reduce waste and eliminate underperforming programmes to address the deficit," said Theron.

"OUTA is pleased to see that the minister managed to find the money to get the free higher education promise started, but he seems to have forgotten that those students will soon need jobs."

Tax

As for tax increases, Theron said the constant increase in personal income tax puts more strain on overburdened taxpayers. The plan to adjust medical aid tax credits to fund what OUTA calls a very vague National Health Insurance plan, will place taxpayers in an even worse position, in its view.

Rob Cooper, tax expert and director of legislation at Sage, said the increases to taxes across the board are less painful than he expected.

"The general improvement to the fiscal framework and the reduction of expenditure by R86bn over three years seem to have gotten us over the hump – for now, in any case.

Bianca Botes of corporate treasury management at Peregrine Treasury Solutions said crucial elements in Budget 2018 that still need to be addressed include where the funding for free tertiary education will be generated, and how much is the amount needed to save SOEs such as Eskom from financial collapse.

"Although the market is responding very well to the budget for the time being, it will take some time for data to trickle through and for analysts to run the numbers to understand the budget’s effect on consumers, production, manufacturing and economic growth," said Botes.

"At the end of the day, the key questions will be whether the budget allocation will stimulate economic growth, and whether there will be enough space left in the budget to ensure that government can meet all the obligations they have set themselves in terms of SOEs and free education."

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