The 2020 Budget – Did We Win Or Lose?

So, this year’s budget speech was interesting, to say the least… Most of us had chewed our fingernails down to the quick, while we waited with bated breath for the news that VAT and income taxes were going to be hiked .

It came as a huge surprise when that wasn’t announced and there was even a reduction in tax for lower-income earners. 🙂

But on closer inspection should we be shouting for joy?

While the obvious coffer fillers, such as VAT and income tax, were given a reprieve, how does the government plan to raise the money it needs to keep the economic wheels turning?

In the less obvious places!

Let’s take fuel levies, for example. There is going to be an increase in the general fuel and the Road Accident Fund levies, which will further increase transport costs. The problem with  levies and fuel prices continuing to go up, is that South Africans are going to feel the effects of this in many ways. 

Taxi fares will increase further, making it more expensive to get to work and to reach health care and education facilities. People who own cars will have their budgets stretched just a little bit further as well. The increase in these levies will be passed down to every South African in the way of increased food costs, clothing etc. 

Spending on public transport will reduce by R13.2 billion over the next  three years, which seems to indicate that government simply isn’t making any real effort to create a workable and efficient public transport system – do they perhaps want as many cars on the roads as possible, pumping fuel levy collections up (no pun intended)?

Government spending cuts on the horizon

The area where the government says they are going to raise additional funds is by reducing the Government employee wage bill. They propose a R160 billion reduction in expenditure over the next  three years. 

That’s great news and long overdue, but how will the trade unions respond?

One of the gripes the trade unions have with this proposed reduction is that public sector compensation has supposedly remained at 35% of total expenditure over the last 10 years. 

According to trade unions, the wage bill is not a problem. This is, of course, very debatable as tax revenue collected over the last 12 years reflects that public sector wages have not remained constant but have increased from 30% to over 40%. You would think that over 12 years this is not a substantial increase, but when you consider that the Growth Domestic Product  is roughly R5.4 trillion, it is a huge increase. 

For things to change, the government and the trade unions must collaborate in implementing strict productivity plans, which are both transparent and effective, ensuring stringent action and accountability. Will this happen though? 

Let’s hope so.

What else can be taken from this 2020 budget?

  • Tax thresholds have been increased for those younger and older than 65
  • No transfer duties on homes that cost R1 million or less 
  • Sin tax on alcohol and cigarettes has gone up and now includes vapes and e-cigarettes
  • Tax-free savings threshold has been increased to R36 000 per year. 

There is still a strong focus on rolling out the National Health Insurance  which is going to cost a fortune (estimates of around R230 billion). Where exactly that money is going to come from is anybody’s guess. With the amount of money that needs to be raised just to keep Eskom from completely ceasing to operate and South African Airways  going into business rescue, we hope that the government has a unique solution..

Did we win or lose? 

What are your thoughts?

Until next time.

The Wise About Life Team

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