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This year’s Budget Speech could see government reach further into taxpayer’s pockets

That’s right. At 2pm this afternoon finance minister Pravin Gordhan will kick off this year’s budget speech and the money’s going to have to come from somewhere…

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In less than an hour Pravin Gordhan will stand up in front of the nation and deliver what some folks are whispering the most important budget speech since 1994. While the latter could be debated, this will certainly be a Gordhan’s defining moment as he tackles his second shot at being finance minister.

Looking at SA as a whole, we’re pretty far up shit-creek right now. The country is sitting at all-time low economic growth figures, the worst drought in the country’s recent history and a hell of a lot of debt… so much so that our GDP can barely keep us afloat as it is; which means the cash is going to have to come from somewhere else.

“The inevitable conclusion is that the only place a finance minister can look for additional revenue would be individual tax, or a wealth tax,” Eugene du Plessis, director and leader of tax at Grant Thornton, told Fin24. 

According to Du Plessis it’s unlikely that Gordhan will introduce a “wealth tax,” as historically it’s never really been all that effective in collecting cash.

 “But there are a couple of things he can do, which can be grouped together as a ‘type’ of wealth tax for lack of a better word,” said Du Plessis. 

He added that it’s very likely that Gordhan will add another percentage point on to our personal income tax while leaving the corporate tax rate as is in order to bolster the economy.

There is, however, another space wherein Gordhan could get a few more Madibas and Du Plessis thinks that government has its sights set firmly on estate duties and trusts.

“The Davis Tax Committee report made recommendations to this effect. Clearly the majority of people that utilise trusts are high net worth individuals and they have significant assets and access to financial and tax planning services.”

“Wealthy individuals put their assets in a trust at a low value and the growth that takes place in the trust is not subject to estate duty. Within the trust individuals can derive an income and capital gains at a reduced tax rate, so we’ll probably see measures that will close these loopholes.” 

According to Fin24, government could also focus on foreign trusts in order to keep some of the taxable income of said trusts in order to boost local collections.

Du Plessis said that, in his attempts to address short term needs, Gordhan could introduce a second round of tax amnesty.

“The second round of amnesty is unlikely to be as generous as the first round in the early 2000s though,” Du Plessis said. 

So, where does this leave us and government? Well… an extra percentage point added to value added tax (VAT) would add a significant amount of cash to government coffers, but could be very damaging to the ANC at the polls later this year.

Let’s see how it pans out.