Opposition parties are calling for tax cuts, but economists warn that Minister of Finance Trevor Manuel is unlikely to deliver these when he unveils the 2004/05 Budget on Wednesday.
The minister, they say, is more likely to focus on pro-growth spending to tackle job creation and crime, with tax cuts low on his agenda.
Econometrix economist George Glynos said he was not expecting any ”fireworks” with regards to such cuts.
”Revenues have been down, so he hasn’t got the same room to offer tax breaks,” he said.
Sanlam Investment Management economist Jac Laubscher agreed, saying large tax breaks were not likely because of the government’s focus on ”consolidation”.
Absa economist John Loos said there was not much scope for tax cuts.
”The risk to revenue makes it unlikely we can expect any real reduction in the major tax rates.”
Glynos said the Budget would be a ”pro-growth” one, focusing on job creation, infrastructure development, crime and Aids.
”It will focus on the things that everyone is worried about. It will be as populist as it can be, given the state of tax collection and revenue.”
The other important issues are the relaxation of exchange control and the tax amnesty, which offers protection from prosecution to those who disclose having moved money offshore illegally.
The New National Party has argued for lowering taxes, saying the impression that this would lead to a loss of revenue is incorrect.
”Tax relief will, in fact, encourage local and foreign investors to invest more capital in new enterprises, which will increase profits … on which tax can be paid to increase government revenue,” said NNP finance spokesman Willem Odendaal.
The Democratic Alliance has called for halving the tax on retirement funds over two years, and abolishing capital gains tax, estate duties and donations tax.
Other proposals include making interest earned tax-free up to R12 000, or 10% of taxable income per year, whichever is greater, and speeding up the process of privatisation by selling Safcol, Denel, the Airports Company of South Africa and 50% of Eskom. — Sapa