2018 Budget Speech
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2018 Budget Speech: What Can We Expect?

On a political front, it has been a very exciting start to 2018. Regardless of where your allegiances lie, it is safe to say that most South Africans are much more positive about our country’s political future than we have been for many years.

The Rand has responded very well among all the changes that 2018 has brought – alleged corrupt officials have been arrested, we’ve seen the back of Jacob Zuma and President Cyril Ramaphosa has impressed with his inaugural State of the Nation Speech.

Next up, we have the Hon. Malusi Gigaba who will deliver the 2018 Budget Speech on Wednesday 21 February.

With a budget shortfall of around R50.8bn, you’d expect the Minister of Finance to be focussed on the job at hand instead of playing Candy Crush during SONA 2018; nonetheless, as another debutant with regards to budget speeches, Gigaba has his work cut out for him.

The main aim for the 2018 Budget Speech will be to close the massive budget deficit. Corrective intervention is needed to improve South Africa’s fiscal outlook and will most likely come in the form of increased taxes on cigarettes, alcohol and fuel.

Further tax hikes could be seen in the form of additional progressive tax, concentrated on higher income groups.

Another important factor will be to restore investment confidence in our markets – Gigaba would have to implement measures to stabilise the debt trajectory to satisfy any reviews from Moody’s and co that are likely to follow.

Another option at Gigaba’s disposal is to raise the VAT rate, currently at 14%. With rampant poverty and unemployment across the country, this is something that would hit the poor the hardest. To limit the effect of an increase in VAT to the poor, we might even see a tiered VAT increase – this will see an increase in VAT on luxury items.

Whether South Africa can avoid another ratings downgrade remains to be seen – we think it might be avoided by a whisker but there’s certainly a lot of work to be done to restore investor confidence.

Above all of this, the Minister would also need to find funding for the proposed free tertiary education program – this is an unenviable task that could make or break the success of the 2018 Budget Speech.

At MoneyPenny, we can only advise that in uncertain financial times, every business and individual maximise the amount of money that can be saved every month and should focus on getting their tax affairs in order while working according to a strict financial plan.

If you would like any assistance with your financials and tax, please do not hesitate to contact us.

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