With increases in VAT and corporate income tax unlikely to be announced in Finance Minister Pravin Gordhan’s 2017/18 budget on Wednesday‚ the only option was for personal income tax rates to increase‚ the head of the Davis Tax Committee Judge Dennis Davis said Monday.
Davis addressed a function of the Cape Town Press Club noting that Gordhan would have to find a R28bn revenue shortfall in very difficult circumstances as growth had not been sufficiently high to generate what was required.
Taxes would have to go up Davis said but the political climate would make it exceedingly difficult for VAT to be increased.
“It probably won’t happen‚” Davis said even though a two percentage point increase in VAT would be sufficient to meet most of the R28bn revenue shortfall.
The judge also believed that it would not be possible to “fiddle around with corporate taxes”.
He noted that other African countries were reducing their corporate tax rates and were SA to increase its rate‚ it would become uncompetitive at a time when the country desperately needed foreign investment.
US President Donald Trump and possibly the UK government were contemplating lower tax rates which could result in funds being channelled to those countries.
Furthermore‚ Davis pointed out that a serious investigation was underway as to what effective tax rate was being paid by South African corporates. To increase the corporate tax rate before the investigation was completed would be unwise.
– TMG Digital/BusinessLIVE