- The burden reduction is paralyzing economic activity, which will have a negative impact on tax revenue collection, warn economists.
- Consumers are already distraught in the current economy and there is no room for tax increases, says a tax expert.
- According to one economist, taxes on alcohol and tobacco, as well as taxes on fuel, are expected to rise.
- For more financial news, go to News24 Business Cover.
The current economic environment does not bode well for tax hikes, according to a tax expert.
In Deloitte’s panel discussion on expectations for the 2023/24 national budget on Wednesday, Nwabisa Ruka, associate director of business tax at the consulting group’s Africa operations, weighed in on the plight of consumers facing a cost of higher life and companies trying to get ahead. profits as load shedding disrupts operations.
“There is no room in the current economy to raise taxes,” Ruka said.
Instead of raising taxes to raise more revenue, the focus should be on solving the load reduction crisis to support economic activity and growth.
“From a fiscal perspective, economic activity has a direct impact on tax revenue collected by the government. It is important that we focus on growing the economy so that tax authorities can collect more taxes,” Ruka said.
If the government has to introduce increases, it should focus on indirect taxes such as the fuel tax or taxes on alcohol and tobacco.
Load shedding is having a chilling effect on economic activity. The Reserve Bank of South Africa last week revised the growth outlook downward to a mere 0.3%. The IMF is more optimistic about South Africa’s growth prospects, projecting 1.2%, 0.1 percentage points higher than its previous forecast.
Johann Els, chief economist at Old Mutual Investment Group, is even more optimistic, with a forecast of 2%. He anticipates that when a state of disaster is declared over the power crisis, then load shedding stages should be reduced and have a less severe impact on the economy.
READ | IMF slightly raises SA growth forecast for 2023 despite load reduction
The Reserve Bank expects 250 days of load disconnection during 2023, up from a previous projection of 100 days. He estimates that the costs of daily load reduction (for stages one and two) range from R1.2 million to R204 million to R899 million for stages three to six.
Investec’s chief economist, Annabel Bishop, warned that the load reduction would “exert a depressing influence” on economic activity that would affect tax revenues.
Momentum Investments economist Sanisha Packirisamy noted that the impacts of load reduction could be offset by companies using alternative sources of power, such as generators or solar photovoltaic systems. But the “net impact” of the load reduction on the economy will remain negative.
“The recent increase in load shedding intensity, coupled with more moderate support from commodity prices, will likely slow revenue collection,” Packirisamy said.
