Reg Rumney reports on what the Minister did not do to=20 the tax system.
Finance ministers cannot do everything they are=20 expected to do, but the Budget this year has some=20 significant tax reform gaps.
One big sin of omission was that no adjustments were=20 made to the tax table to take into account “fiscal=20 drag” or “bracket creep”.
There was no mention of this insidious, silent tax,=20 whereby inflation-spurred salary and wage increases are=20 eaten away by tax as taxpayers get pushed into higher=20 tax brackets.
Nor was there any adjustment to the threshold at which=20 the top or marginal tax rate becomes effective. This is=20 still R80 000.
True, the government gave away around R2-billion in=20 moving to a non-discriminatory single tax table.
That is the amount, according to Inland Revenue=20 commissioner Trevor van Heerden, that is gained by not=20 adjusting the tax tables for fiscal drag.
Among the controversial tax changes Finance Minister=20 Chris Liebenberg dodged were:
* Raising value added tax. This was a non-starter in=20 political terms, because of opposition from the union=20 movement, but would have garnered a big sum very=20 easily. VAT for 1995/96 is set to bring in an=20 astonishing R32,750-billion.
* Imposing a capital gains tax. This tax has always=20 been more symbolic than a major revenue earner, but it=20 has been discussed earnestly for years.
* Abolishing marketable securities tax. This is=20 estimated to bring in R525 000 in the 1995/96 year and=20
is said to be an impediment to selling and buying=20 shares on the Johannesburg Stock Exchange, increasing=20
the JSE’s famous “illiquidity”. It would probably have=20 been opposed by the union movement as a gift to the=20
* Adjusting or removing secondary tax on companies.=20 This tax appears to have outlived its usefulness, since=20 foreign investors are said neither to understand or=20 like it. It is budgeted to bring in R1,760-billion in=20 the 1995/96 financial year.