BRIAN KANTOR: The Treasury’s decision to forgo tax hikes bodes well for the economy
The budget review recognises that taxes have complicated feedback effects
The Treasury has had an epiphany. It acknowledges that higher taxes can lead to slower growth, and that lower taxes can lead to faster growth. Hence the decision to forego R40bn of planned income tax increases and to propose a reduction in the corporate tax rate to 27%, all in the interest of faster growth. Hallelujah.
The budget review recognises that taxes have complicated feedback effects. That the burden of higher corporate taxes will be passed on by the providers of capital to consumers of goods and services in the form of higher prices and lower incomes for those who provide labour and other services to the corporation. ..