Analysts weigh in on what the mini budget means for taxpayers

It is possible that further tax increases may progressively lead to decreased revenue being collected, with the state’s revenue hole increasing over coming years, said Tertius Troost, tax manager at Mazars, in reaction to Finance Minister Tito Mboweni’s maiden mini budget on Wednesday.

According to Mboweni, 2018 will be the first year since the 2008 financial crisis that tax revenue growth does not exceed gross domestic product growth, due, in part, to the need repay R20bn in VAT refunds.  Despite VAT hikes in the February budget, the state is predicting a R27.4bn revenue shortfall due to the need to  repay backdated VAT refunds. Shortfalls for the 2019/20 and 2020/21 tax years have been revised higher by R24.7bn and R33bn respectively.

The new finance minister did not announce any new taxes on Wednesday. “No additional tax increases are proposed at this time,” stated the medium-term budget policy statement.

Bernard Sacks, a tax partner at Mazars, said the minister indicated in his mini budget that Treasury would avoid further increases to personal income tax, corporate income tax, and VAT next year, unless it is required by the economic environment. “While this is one bit of good news for taxpayers, the question remains how Treasury then plans to plug the R27.4bn revenue shortfall.”

“It seems to indicate that while income taxes may not increase in next year, price increases […] could still be common, and the cost of living for the man in the street is likely to increase significantly over the coming years.”

Sacks even foresees a possibility that the country may see a taxpayer revolt in one form or another. It may be in the form of more taxpayers refusing to pay e-tolls for roads, or it may “simply be in the form of more taxpayers leaving the country”.

Chris Eddy, senior investment analyst at 10X Investments, said the reality of lower revenue collection resulting from low growth, combined with a failure to rein in spending means government spending will have to be financed with additional debt.

National Treasury projections have debt-to-GDP topping out at 59.6% in 2023/24, which is on the limit of the 60% that ratings agencies would be comfortable with.

For Dr Morne Mostert, director of the Institute for Futures Research, a strategic advisory unit at Stellenbosch University, what is urgently required is disruptive growth. “In the abnormally unequal and tumultuous economy of SA, ‘no tax increase’, maintaining the expenditure ceiling and providing no extra funding for unbudgeted public sector wage increases are damp squib incentives for investment.”

“Poverty is likely to be worse for most people. Not because of Mboweni or any intrinsic South African characteristic, but because of the slow molasses of economic malaise generated under the Zuma administration, the true scale of which is only now emerging,” he said.

Eradicating both financial and emotional poverty will radical and innovative economic incentives, he said.

Maarten Ackerman, chief economist and advisory partner at Citadel, said a distinct positive emerging from the MTBPS was that an increase in personal or company tax in the February budget seems unlikely, which should provide some relief for battered consumers.

Advocacy group the The CEO Initiative said it welcomed the commitment to avoid raising additional revenues through increased taxes unless the economic environment requires it.


Carin Smith.25 October 2018. Fin24. Analysts weigh in on what the mini budget means for taxpayers. Available from

2018-10-26T14:46:48+00:00 October 26th, 2018|Articles|