In Parliament today, Minister of Finance Enoch Godongwana will deliver the first Budget Speech under the Government of National Unity (GNU). 

The National Treasury is expected to announce a wider budget deficit forecast for the next three years compared to its October estimates. The deficit is projected at 4.55% of GDP for the fiscal year starting in April, up from the previous 4.30% forecast.  

Factors contributing to the increased deficit include rising debt-service payments due to elevated global borrowing rates, social-spending programs, and ongoing support for state-owned enterprises like Eskom. Economists predict a deficit of 4.00% of GDP in the following year, with a gradual reduction to 3.60% by 2027/28.  

Many experts predict that this budget will again rely on increasing ‘stealth taxes,’ such as the bracket creep or lack of adjustment for inflation in the tax tables, leaving people in higher income brackets paying more tax.  

An increase in the fuel levy is another stealth tax risk which would have serious knock-on effects to transport and the cost of living. Others include the increase in sin taxes (especially alcohol). 

Most commentators agree that government should not be tempted to raise taxes thinking that it will automatically raise revenue. Even SARS Commissioner Edward Kieswetter believes that tax increases have reached an inflection point where they could actually have negative consequences, and the focus should shift to revenue collection instead. 

Small and medium enterprises should continue to push for a conducive environment for investment and growth, with policy support, access to finance and a reduction in red tape key measures urgently needed. 

Organised business  has already welcomed reforms to public private partnership rules to cut red tape for projects less than R2 billion However, if Treasury is to help create  a competitive environment for private sector investment, it should look at combatting the illicit financial flows by focusing on ending corruption and implementing policy reforms which help’s the private sector drive economic growth. 

This is especially important for both FDI and local businesses looking to access international markets and pushing for mechanisms to simplify cross border trade.  

The current tax regime is punitive and not sufficiently incentivising businesses to create jobs in the formal sector.  Any increase in excise or corporate income tax risks tipping the scales back towards the informal market.  

A balance is needed for the GNU government to be able to increase its tax revenue by embarking on the reforms needed  to economic growth, rather than keeping the country a low growth, high tax trajectory.