Burning The Midnight Oil In Many A Corporate Tax Department
It was no surprise when South Africa’s Minister of Finance, Nhlanhla Nene, announced an increase in personal income tax in the 2015 Budget. But it could have been a lot worse. Many observers had predicted that the Government would increase value-added tax, or even corporate tax, to address a budget deficit that is threatening to become structural. Doubtless the devil will be in the detail. And the phrase “the Government is to take further steps to combat revenue leakages through erosion of the tax base, profit shifting, and illicit money flows” shows that beneath the more eye-catching measures to help small businesses, a series of complex revenue raisers lurk that will keep the midnight oil burning in many a corporate tax department. There’s no getting away from the fact, though, that the Government needs revenue and the Budget therefore raises tax rather than cuts it. And this isn’t just a one-off event either. South Africa’s economy is slowing, and despite a huge increase in the country’s tax base over the last 20 years or so, taxes simply can’t keep pace with spending. The current administration’s ability to manage the economy, as well as its own finances, must be being called into question by some foreign investors. Let’s not forget that foreign investment will also have a substantial role to play in poverty reduction and South Africa’s future prosperity.