Wat Rising Never: S.A. What does the economy mean

This bodgast can be heard in ono.fm Here.

MEmmemi Max: Now, the budget play yesterday. The delay in delaying a controversy surrounding the value added line (wat), I want to focus on it now. South Africa’s economic tragedies are not secret, rising debt, dull growth and always tight financial. The government is reportedly considering raising VAT to 17%as a way of inserting the budget deficit.

Read: Wat that broke the budget

Now, the supporters argued that the existing tax base is the most efficient way to raise revenue quickly without overload. Although critics, it will attack the poor and slow down economic activity.

So let’s get down on the weeds of this debate. Professor Andre Rukes with us, the economist of the Stelposh Business School. Andre, always happy to talk to you. Wat increased to 17%, would it have made economic meaning?

Andre Rukes: Jeremy, which is one of those things in the economy, (always) is always trading transactions, and you can argue against and against one of the most stable. But I think there may be an environment here, and if you see the script of the first half of the budget speech, it was very good. Talking about the desperate need to reduce or slow down the growth of government debt, no one can deny it.

The need to grow the economy is openly through the cost of infrastructure. Yes, there is no problem in it. Some realistic forecast for growth. Not that ambitious, however realistic.

Read: Budget …

So halfway, empty sailing, then suddenly it comes to the notion of revenue and tax plans. He points out, that is very valid, and all of these are very difficult, the act of balancing, there are three options.

Reduce costs or take a higher loan, you don’t want to walk or make strategic tax changes. His next sentence said, “After carefully analyzing trade transactions, we have chosen the most responsible path.”

Now, he would have said that he would have said that he would “reduce unnecessary government expenses.” But he didn’t say that. The next sentence says, “Rise the VAT by two percent.” But it makes it even worse. “A necessary steps to help public employees to fund the public sector wage increases.”

So this was a partial attack on the entire way. So this actually says, folks there, you are going to pay more tax to fund the salaries of civil servants primarily.

The importance of the story is here. One would not have seen the lines orbiting the lines or not a big stubborn. We always get an increase in sin lines, and it is parallel to the lesson. Instead of focusing on reducing government costs.

As admitted, there are not many ways. We cannot see politically reducing the salaries of civil servants. Social grants, they seem to be part of the system and (parcel). We cannot reduce them. We do not want to reduce health or education, but there should be other parts, but not necessarily reduced, but saving, useless and unauthorized and wasted costs. Of course there is money to save there.

Read: Consumption and two pot withdrawal of revenue collections

(SARS) Commissioner Mr. Edward Keeswether pointed out that two days ago would not increase the tax, and that there would be hundreds of billions of brands that were not collected due to various logsmams. If we are able to remove from those lockjams, we collect a few hundred billion randies organically inserting the gap. So I think this is the question of time and environment.

Jeremy Max: Do you think this is a politically bad thought because Wat is seen as a reactionary line and hit low -income families?

Andre Rukes: Well, yes. He also points out, and everyone will accept this, and raising the personal income tax will not be wise at this point. Likewise, we all know, the personal income tax site has a high burden. Raising the corporate tax rates is not too smart because we want to attract more investment. It will prevent investment.

Read: Da warns the tax hike plan ‘broken’ economy

So this is the process of eliminating. But, yes, you are right, this is always considered a reactionary line, hurting the poor more than the poor. In the original budget speech, he says, don’t worry about it, because we protect the vulnerable houses that are vulnerable by expanding the list of zero -estimated materials, ie tin vegetables and milk liquid compounds and various meat products.

He, in the original speech, spoke about the high fuel levyralif, not raising it, then increasing social subsidy than inflation and repairing the income tax brackets to save us against financial traction, both are poor and poor.

So in their way of thinking, there was some sort of bizarre dependence to raise the watt rate. Nevertheless, as he argues both ways, Wat is considered the best line, but in our environment, it often becomes less than justifiable in our environment. So no, to answer your question, I don’t think it should be.

Jeremy Max: Professor, if this announcement passes, what would have done the highest wat rate based on inflation?

Andre Rukes: Well, if you remember that a large portion of the goods in the basket, and that the services are subject to VAT, it naturally is not 2%, but a few percent, some percent. Maybe 0.5%, I didn’t make the calculation. This will inevitably raise the inflation rate.

I think he may have argued, okay, but inflation is better and less at this time.

So another few percent not make a big difference. But they are empty words, and if you address them to the poor, as we all know, they suffer from a very deep life cost.

Jeremy Max: Considering our current weak economic growth, a hike may have further suppressed the need for consumer, and the long -awaited income gains will be less than the expected gains.

Andre Rukes: Of course, this is an evil circle. If the economy is growing, if we are lucky, 1.5% of this year and still less in the last few years, the tax site is growing at a very dull speed. This is part of the problem, and you cannot trust the expanding tax site to create more income.

Read: Lack of national budget means SA and tax collection

If the economy is growing to 3% or 4%, many other problems will be solved or somewhat solved, not at least, as I said, without the organic growth tax rates in tax revenue.

But, this is a pesky debt status rates, so it is a government credit that is divided by GDP, so the number below the GDP is increasing by 3% or 4%, ie 10% nominally. You can raise the government’s debt less than 10% and the rate is small. So the need for growth is instant and, of course, long -term and structure.

Read:
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Jeremy Max: Always appreciate the analysis. Professor Andre Rukes, Economist at Stelposh Business School, Thank you very much.

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