STATEMENT ISSUED BY GERHARD KOORNHOF, MP
UDM SPOKESPERSON FINANCE
Minister of Finance introduced a very gutsy budget. It is bold and to the point
and clearly indicates the policy priorities of the government. It contains a
comprehensive set of tax reforms, and continues to close the gap between the
rich and the poor, which represents a cornerstone of the UDM economic policy.
the Minister used the window of opportunity for the SA economy by introducing
measures to encourage domestic savings and putting back money in the pockets of
taxpayers, it missed opportunities to announce substantive policies to create
wealth, to introduce innovative job creation programmes, and addressing
sufficiently the inflexibility of the labour market. He also could have
expressed himself on the issue of shifting the focus of taxation away from
income to expenditure and transactions.
UDM welcomes the following announcements:
the total tax burden on individual taxpayers by way of a tax relieve
amounting to R10 billion. It is hoped that this reduction will increase the
propensity to save.
the budget deficit to 2.6% of GDP. While the UDM welcomes the steady decline
in the budget deficit over the last few years, this deficit remains a tax on
future generations, and therefore maintains the view that it should be
reduced to zero within the next 3 years.
targeting of 3-6% by 2002 in a low and narrow band. This will enhance
predictability and push inflation expectations downward. We also welcome the
definition of inflation in this regard, namely CPI minus interest rates.
to small businesses by introducing new tax rates of 15% on the first R100
000 of taxable income and 30% thereafter. It makes tax compliance easier.
However, much more measures are needed to encourage small businesses. They
are the real wealth creators in our economy. This assistance to SMME’s are
in line with the UDM policy of enterprise development.
control relaxation, especially for companies and unit trusts.
attempt to fight crime more effectively, by giving the Police Service R1.1
billion more over the next 2 years. It will mainly be used to improve
information technology. It is, however, a pity that there is no indication
to increase the number of police officers on our streets, for patrolling and
allocation of R75 million in the current year to fight HIV/AIDS.
intention that there will be a better balance between personnel and
non-personnel spending, which will improve the quality of services
delivered. What is lacking, however, is the detail in this regard. How will
the government address the wage bill of the public service?
UDM expresses its concern over the following announcements:
introduction of a Capital Gains Tax (CET), despite the fact that the Katz
Commission has recommended that such a tax should not be introduced. This
can be regarded as a “wealth tax”. Its probably the biggest surprise in
the budget. Generally the market does not like surprises!
economic growth of 3.4% over the next 3 years is just not sufficient in an
economy where the unemployment rate is over 30%. Such an estimated growth
rate will not absorb new entrants into the labour market, and may result in
“jobless growth”. Originally GEAR expected a growth rate of 6% per annum
is not fast tracked, which means that potential proceeds will not be used to
reduce the largest expenditure item for Government, namely state debt, fast
enough. Proceeds from privatisation for 2000/01 is expected to amount to R5
billion, only doubling to R10 billion in 3 years from now.
new, innovative infrastructural job creation programmes were announced.
Unemployment remains the single most important socio-economic problem in SA.
We expected a much more serious attempt by the government to tackle this
fuel levy increase will hit daily commuters severely and represents bad news
for low-income commuters. This levy will increase by 5c/litre for petrol and
3c/litre for diesel.
interest income exemption from R2000 to R3000 a year is an insufficient
increase and is unlikely to encourage domestic savings. It won’t create a
culture of savings. The Minister could have been more innovative in this
UDM congratulates the Minister on the bold steps taken in many areas, but is
concerned that not all the opportunities opened to the Minister, have been
utilized. Much more hard work lies ahead to ensure a higher level of sustainable
economic growth which will attract much needed domestic and foreign investment.
Gerhard Koornhof, MP
UDM Spokesperson for Finance
23 February 2000