Trade union federation Cosatu has called for tax increases, some targeting the wealthy, and says this will go a long way towards fixing SA’s perilous public finances.
Cosatu, an ANC alliance partner, which put its weight behind President Cyril Ramaphosa’s bid to head the governing party and the government, said it believes that the state can increase revenue and provide more resources in support of economic stimulus, job creation and developmental objectives by increasing company and capital-gains taxes, among others.
In the medium-term budget policy statement in October, finance minister Tito Mboweni painted a bleak picture of SA’s finances. It was projected in the statement that budget shortfalls would exceed 60% of GDP over the next three years. The government downgraded its public debt forecast, and now sees it rising above 70% of GDP over the next three years, instead of February’s projections that it would stabilise at about 60%.
The Treasury has suggested that additional tax measures are under consideration to boost state coffers.
On Friday, parliament’s standing committee on appropriations and the select committee on appropriations held public hearings on the 2019 Adjustments Appropriation Bill and the medium-term budget. In its submission, Cosatu said increasing company taxes to 30% or 32% would generate an additional R13bn-R26bn in revenues. Increasing capital gains tax to 45% could add R4bn, the union said.
Hiking income tax for those earning more than R1m to 45% could raise R5bn more.
Cosatu parliamentary co-ordinator Matthew Parks said the government should consider adding a further tax on “wealthy companies”, increasing inheritance, estate, land and dividends taxes for the wealthy, and hiking VAT for luxury goods, and custom duties for imports.
Parks called for the introduction of a “solidarity tax”, aimed at capping the growth of earnings of the top 10% and to accelerate the earnings of the bottom 10%.
He suggested the government should consider introducing investment tax credits to encourage local procurement of machinery and equipment.