ECONOMIC WEEK AHEAD: Malusi Gigaba needs a pot of gold
The finance minister delivers his mini-budget — a roadmap of the government’s spending priorities over the next three years — on Wednesday, writes Asha Speckman
Given that SA’s tax rates are higher than the average for Organisation for Economic Co-operation and Development (OECD) member countries, Finance Minister Malusi Gigaba’s plans for raising further revenue will be key to his medium-term budget policy statement this week.
Gigaba will deliver the mini-budget — a roadmap of the government’s spending priorities over the next three years — on Wednesday.
The subdued environment, characterised by low economic growth, has constrained his fiscal levers.
Economists expect Gigaba to prepare the market for meaningful tax hikes in the February budget, alongside funding and sustainability proposals for failing state-owned companies.
First National Bank (FNB) economist Mamello Matikinca predicted that guidance on the implementation of the sugar tax, less fiscal drag relief to prevent inflation and earnings growth pushing taxpayers into higher brackets and a proposed reduction in medical aid tax credits would be a likely outcome of the budget.
"A slightly stronger rand and weaker oil price should also pave the way for higher-than-normal fuel levy increases."
Momentum Investments researchers Herman van Papendorp and Sanisha Packirisamy note in a research statement that SA’s income tax rates are higher than those of OECD member peers, at 26% versus less than 20%.
The South African Revenue Service has noted a decline in tax compliance levels. At the same time, the government’s total expenditure has grown at 6.9% year to date, compared to 2016. "Though government alluded to an additional R15bn in tax revenue measures in financial year 2018-19, more may be necessary to help offset fiscal slippage," they said.
The Reserve Bank’s leading indicator, a gauge of where the growth cycle is headed, will be published on Tuesday.
Data on inflation for producers will round off the week’s important economic data on Thursday.
Kamilla Kaplan, economist at Investec, said the producer price index (PPI) was forecast to have lifted to 4.9% year on year in September, from 4.2% in August on account of a 19c/l rise in petrol and 44c/l in diesel. The PPI would continue to reflect disinflation in manufactured food "as a result of the favourable maize supply outlook", Kaplan said.