Tito Mboweni must not raise taxes, DA says

The DA is opposed to new taxes being imposed to address the yawning revenue shortfall as this would act as a further brake on what is already a low growth rate.

Instead it has proposed a number of ways of reducing government spending including slashing the public sector wage bill and stopping bailouts for state-owned enterprises (SOEs).

The Treasury should not introduce tax increases “by stealth” by failing to provide for the effects of inflation on income tax brackets, DA finance spokesperson Geordin Hill-Lewis said at a media briefing on Monday, to release the party's budget proposals ahead of finance minister Tito Mboweni's speech in parliament on Wednesday.

The only test for the DA of the credibility of the budget will be the seriousness of the plans presented to rein in national debt, cut the public wage bill and grow the economy, Hill-Lewis said.

If Mboweni failed to tackle the unrestrained expansion of public debt, the sharp decline in tax revenues, the ballooning public wage bill and the enormous bailouts for SOEs, then SA would lose its only remaining investment grade credit rating by Moody's Investors Service and face a solvency shock.

Key to the DA's proposal to stabilise the budget deficit, bring down debt and restore fiscal discipline is a cut in the public sector wage bill and stop all bailouts to SOEs. It says these measures will achieve an adjustment of R349.95bn over the medium-term expenditure framework (MTEF) period.

The party says that government spending will have to be cut by R250bn over the next three years, averaging R83bn per fiscal year if the budget deficit and government debt are to be reined in.

It estimates that by stopping bailouts to SOEs government will realise R35.1bn in the 2020/2021 financial year — including R33bn earmarked for Eskom in 2020/2021; R1bn reserved for Denel in 2020/2021; and R1.1bn from the approved R3.2bn bailout for the SABC.

Also contributing to reduced government expenditure would be a R168bn cut to the public wage bill over the next three years. DA public service and administration spokesperson Leon Schreiber said this could be achieved through freezing the wages of the 33.7% of public servants such as highly paid head office managers and supervisors who are not covered by the occupation specific dispensation which covers front-line delivery staff such as nurses, teachers and police officer.

The wages of managers and supervisors should be frozen at 2019/2020 levels over the three-year MTEF period. This would yield R138.6bn with a further R29.4bn derived from reducing and implementing a hiring freeze on all managerial positions until the number of managers is reduced by a third — approximately 9,200 posts.

The DA also proposes one-off revenue raising mechanisms and cuts over the MTEF period that can raise R67.85bn. These include auctioning digital spectrum to R5bn, selling government's Telkom shares to raise R5bn, selling Sentech to raise R8bn, eliminating New Development Bank funding to save R25bn and eliminating national health insurance funding would save R8bn.

Apart from the Fiscal Responsibility Bill that the DA will table in parliament this week, the party has proposed income tax incentives to assist individuals to generate electricity at their private residences for their own consumption.

The emergency solar rebate (ESR) would offer tax rebates for solar systems installed at residential properties and would operate for three years only. It would take the form of a 100% tax deduction for the cost of installed solar equipment, up to a maximum of R75,000. The purchaser would fund the cost of installation upfront, and would claim the cost against their taxable income at the time of submitting their ordinary annual returns.

“This emergency initiative would cost R4bn over three years, and remove 480MW from the grid, with even a moderate take-up rate,” Hill-Lewis said.

“This will alleviate pressure from the grid, helping lower the load-shedding burden for other families, and importantly for businesses.”

ensorl@businesslive.co.za