The Chambers of Commerce and Industry of South Africa (Chamsa) has welcomed the South African government’s commitment to low inflation — but says a thick-point definition of the target should be introduced.
Speaking on behalf of the chamber, Advocate Abri Meiring told members of the parliamentary joint Budget committee — which is holding hearings on last week’s Medium Term Budget Policy Statement — that the chamber supports the decision to keep South Africa’s inflation-targeting range unchanged at 3% to 6%, “to prevent pressure on the South African Reserve Bank to adopt a more restrictive policy stance”.
“However, we wish to suggest that government considers moving to a so-called thick-point definition of the target, instead of a range, in order to address confusion regarding the target and to better anchor inflation expectations,” he said, suggesting that it be set at 4,5%.
Meiring also argued that value-added tax (VAT) should be increased by 1% to raise about R6,5-billion in tax revenue. This would offset the need to tax the retirement funds — which raises about R4,5-billion.
“Chamsa is deeply concerned about the slow progress in this area [of pension tax reform], which organised business first raised in 1999 with the [National Assembly] portfolio committee on finance.
“The taxation of retirement savings remains inappropriate, even at 18%.”
Noting that the Medium Term Budget Policy Statement “offers little prospect of tax relief in the 2005 Budget, Chamsa understands the underlying reasons for this but would urge that two matters of principle should not be neglected”.
They are adjusting individual taxation for fiscal drag and ensuring the competitiveness of the South African corporate tax regime in relation to South Africa’s trading partners and competitors.
“We agree with the National Treasury that there are also tax policy issues related to small enterprises that warrant review. We therefore reiterate our call for the extension of the graduated company tax rate of 15% — on the first R150 000 — to small service companies as a matter of policy,” Chamsa said. — I-Net Bridge