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SA must raise tax on rich to lift revenue, OECD says

‘The tax base is narrow and revenues are too small to meet future spending needs’.
South Africa’s government should increase taxes on wealthier individuals to help boost revenue needed for the nation’s growing demands, the Organization for Economic Co-operation and Development recommended.

“The tax base is narrow and revenues are too small to meet future spending needs,” the Paris-based group of 34 developed nations said in its Economic Survey on South Africa, released on Friday. “The public sector will face considerable resource needs in the years ahead to expand social and economic infrastructure. Meeting these needs will require increased revenues.”

South African Finance Minister Nhlanhla Nene raised taxes on middle- and high-income earners for the first time in two decades in February to help bolster revenue in the face of sluggish economic growth. He is seeking to narrow the budget deficit to 2.5 percent of gross domestic product in the year through March 2018 from an estimated 3.9 percent this year.

The government began a review of its tax system last year, led by Judge Dennis Davis. The panel recommended in a report this month that the government raise value-added tax rather than lifting personal and corporate taxes.

The OECD said South Africa should proceed with the implementation of a carbon tax and ensure that the rate rises gradually to be effective. This will align the nation’s climate change policy stance over time with those in most OECD countries and reduce the economy’s dependence on carbon-intensive production, the group said.

Implementation of the tax on the amount of carbon emitted by companies has been delayed since it was announced in 2012. Nene said in February that draft legislation will be published later this year.

While higher taxes, rising energy prices and wage demands may add to pressure on inflation, the “current monetary policy setting is appropriate for the near term,” the OECD said. The Reserve Bank may be tested if “core inflation continues to rise, even in the absence of faster growth.”

©2015 Bloomberg News

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Well, that should encourage even more employers to close their business and venture overseas. The government is like a plague of locusts, they will only be satisfied when there is nothing left.

All very well raising more tax from a shrinking tax base. Once they have this money, who is going to deliver the “social and economic infrastructure”? Cuba, Russia, maybe India. Don’t think SA has required resources. So the cash ends up in a couple of misguided projects such as The Arms Deal, Nkandla, ETolls or maybe unaffordable Nuclear. SA will be well milked by its politicians and foreigners and their various organisations. Carbon tax another stealth tax. Viva ANC viva. We are going nowhere fast I’m afraid. As Starbucks says, it will simply encourage more folk who are able to generate tax to find other places where their tax will deliver a benefit.

Raising taxes is an excellent way for the ANC to ensure South Africa exports far higher numbers of taxpayers.

End of comments.

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