The average man on the street is going to end up spending about 0.7% of his taxable income extra on paying tax.
Chief Economist at Econometrix Azar Jammine has slammed finance minister Enoch Godongwana’s budget speech to Parliament this week, labelling it as “lazy”.
In his revised speech on Wednesday, Godongwana announced a 0.5% increase in Value-Added Tax (VAT) from 1 May and a further 0.5% hike next year. Personal income tax brackets and medical credits remained the same.
‘Lazy budget’
Jamine told eNCA that the budget will have an impact on the country.
“I think it was a lazy budget, and there was an additional thing that government could do and did do, and that is to borrow more than it had planned to do three weeks ago. The budget deficit has increased from 4.4% to 4.6% of the GDP.
“What they also did is, instead of using VAT as a source of additional revenue, they decided to move to increase personal income tax quite sharply by R18 billion, by not adjusting the tax brackets upwards to take account of inflation pushing up people’s wages into higher tax brackets,” Jammine said.
ALSO READ: Experts warn Budget 2025 is a ‘book balancing act’ that lacks growth stimulus
‘Man on the street’
Jammine claimed this means the average man on the street will spend about 0.7% of his taxable income extra on paying tax, leaving him with that much less to spend on everything else.
While Gondongwana indicated that the government will reconsider rescinding the 0.5% VAT hike in 2026 depending on the country’s financial health, Jammine warns that the government has not budgeted for specific services.
“It’s not good enough because if you look at the details, you’ll see that the government has not budgeted for another year of the Social Relief and Distress (SRD) grant beyond this coming year. So, what’s it gonna do in that regard?” Jammine asked.
“Is it gonna dump the SRD this time next year? Even on that basis, it is still planning to increase the VAT rate by a further 0.5% next year. So, what does that tell you about the confidence with which it’s looking at the budget?
“At the heart of the problem is that this year is going to see an increase in nearly 8% in government spending, and a lot of that has to do with the fact that public sector wage remuneration is set to increase by 7.8% this year,” Jammine said.
Jammine said many are sceptical that the government has not “dug sufficiently and deeply” into its resources to save money on expenditures and has instead relied on raising taxes.
ALSO READ: Navigating Budget 2025: Use these apps to manage your finances
