OWN CORRESPONDENT, Cape Town | Thursday
SOUTH African Finance Minister Trevor Manuel has given billions of rand to the poor and to middle income earners in tax reforms in a bittersweet budget designed to kickstart the rural economy and create much-needed jobs.
Manuel said an ambitious privatisation plan would go ahead, and announced targetted tax breaks for job-creating investments, but left corporate taxes unchanged, saying many companies were using aggressive tax-avoidance schemes.
His 2001/2 budget, however, allocated less than a R1bn ($130m) over three years to tackle the Aids epidemic that threatens to swamp the nation.
Manuel announced R8.3bn in tax cuts in the coming year on top of last year’s R10bn give-away, but resisted business pressure for a reduction in the 30% corporate tax rate.
“I think the initial signals are that this will be a market- friendly, investor-friendly and palatable-to-the-poor budget,” said Standard Bank economist Goolam Ballim.
“This budget brings the sweet taste of liberty to the top 50% of the people, but it brings more bitterness to the 45% of the labour force who don’t have jobs,” said political analyst Sampie Terreblanche.
Manuel raised tax brackets across the board but with a strong bias in favour of low and middle-income earners, while the top tax rate remained at the 42% level set last year.
Bowing to pressure from industry, the minister announced a six-month delay to October 1, 2001, in implementation of a controversial capital gains tax.
With an eye on the poor, Manuel abolished the tax on paraffin – still used by more than half of South African households for heating and lighting – but raised taxes on alcohol and tobacco.
Overall he budgeted government income to rise 10.9% to R233.4bn ($29.96bn), with spending up 10.7% to R258.3bn.
As a result the budget deficit would creep up to 2.5% of gross domestic product in 2001/2 from 2.4%, but would fall in later years.
Economic growth would rise to 3.5% a year in the coming three years against a revised 3% last year.
Privatisation – specifically of telecommunications monopoly Telkom in the last quarter of this year – would add R18bn to state coffers, falling to R5bn a year in the following two years.
Job creation is at the core of the national plan and Manuel announced tax breaks for companies investing in strategic developments and set aside money to cut the costs of employing and training people.
Manuel set aside an extra R7.8bn over the coming three years on building and repairing roads and railway lines as well as coping with widespread damage caused by floods.
He also announced an extra R4bn over the next three years to hire more police, provide more vehicles and raise police pay. – Reuters
ZA*NOW:
South Africans to taste ‘sweet fruit’ February 21, 2000
Budget likely to chart growth path February 21, 2001