/ 24 October 2005

Reduce corporate tax, DA urges Manuel

South Africa’s corporate tax should be reduced to 25% or less as part of Finance Minister Trevor Manuel’s Medium Term Budget Policy Statement (MTBPS), the official opposition Democratic Alliance (DA) has urged.

Manuel presents the MTBPS to Parliament on Tuesday. The DA suggested that individual tax cuts should also be provided for the middle and lower classes and more money should go to infrastructure and social spending.

DA finance spokesperson Ian Davidson said Foreign Direct Investment (FDI) by the private sector was one of the key ingredients that South Africa needed if it were to reach its goal of 6% growth.

“Assuming a reduction in the corporate tax rate of 4% costs the fiscus about R10-billion and our revenue overruns are in the region of R30-billion, there would still be room for increased investment in infrastructure and increases in social welfare expenditure.”

The MTBPS provided Manuel with the opportunity “to announce that the extra billions in the government’s coffers will be put to good use. A budget overrun is created when more money is collected by the taxman than anticipated in the original budget. As much as R60-billion was collected in revenue overruns in the decade up to 2005”.

The windfall could be used to “significantly raise the lowest PAYE category, putting more money back into the hands of ordinary South Africans”.

Davidson also suggested that “given the fact that savings in South Africa are at their lowest levels since 1940”, it would be an attractive proposition to raise the limit on interest and dividend income tax exemption from R15 000 to

R30 000. – I-Net Bridge