Treasury will tread carefully with corporate tax, says Mondli Gungubele
Finance Minister Nhlanhla Nene’s deputy says SARS was on Ramaphosa's radar from the outset
The South African Revenue Service has been on President Cyril Ramaphosa's radar since he assumed office, says Deputy Finance Minister Mondli Gungubele.
SARS commissioner Tom Moyane was suspended on Monday.
“Before we left for the investor road show, the issue of the state of SARS was being discussed. That has always been treated as an urgent matter because of low tax morality and a lack of confidence from tax payers,” he said at a press briefing in Sandton on Thursday.
The message from credit rating agencies seemed positive, he said.
“We had a session with almost all the rating agencies. We had very positive discussions which were very frank and honest. Anxiously and with all humility, I am expecting something better.”
Moody’s is the only one of three major ratings agencies that still rates SA’s foreign currency and rand-denominated debt at investment grade. It is expected to make an announcement on SA's rating on Friday.
A downgrade would lead to SA’s expulsion from the Citi world government bond index and projected outflows of R100bn.
The issue of land expropriation without compensation was raised, and Gungubele said bringing it to the fore would result in more certainty.
“There is a fear of destabilisation potentially but the message we put across is that not addressing it is a source of uncertainty. The land question is a scene of division.
“Expropriation without compensation is going to be refreshed. Resolving it is reducing uncertainty.”
At a business breakfast earlier on Thursday, Gungubele defended the recently announced VAT increase, while giving an assurance that Treasury will tread carefully with corporate tax.
An increase in VAT was the easiest way to plug the hole in the fiscus, he said at a business breakfast in Sandton on Thursday.
"We had to move right into tax and work very carefully within that area. VAT was the easiest way to deal with those problems and will bring in no less than R36bn."
While the economy had recently shown an improvement, and investor confidence had soared after a period of uneasiness due to several areas of political and policy uncertainty, he said Treasury still had to acknowledge the picture painted by the medium-term budget policy statement, including rocketing debt.
"This called for a special intervention in our budget this year which forced us as government to respond to certain measures," he said.
There was a focus on cutting down on expenditure and investing in education.
"The graduate sector has around 3% unemployment. If you invest there you will see a net benefit of contribution to tax revenue," he said.
Treasury would tread carefully with corporate tax, he said, adding that a collaboration between the public and private sector was of critical importance.
"We must not do anything that must undermine this partnership. We don’t have much going forward in dealing with socioeconomic uncertainty without the private sector."
The role of this partnership could be further supported by improved economic growth and investor sentiment, he said.
Last week, Treasury and business officials went on an investor road show in the UK and the US.
Echoing Finance Minister Nhlanhla Nene, Gungubele said investors’ interrogation was positive, although there was pressure to answer tough questions — particularly on state-owned entities.
"Importantly, they saw SA as one of the strategic countries in the continent."