South African Analysts Expect Good News Budget

by Robert Lee, Tax-News.com, London

19 February 2002

South African analysts have predicted that Finance Minister Trevor Manuel's 2002 budget, due for release on Wednesday, is likely to be a 'good news' budget for some of the country's taxpayers.

A sharp surge in government revenues last year due in part to more effective tax collection, has meant that the Finance Minister has around 20 billion rand ($1.75 billion) extra to play with in his budget, and experts are expecting a raft of tax cuts and spending increases.

However, these are likely to be mainly directed at the nation's poorer citizens, and there is speculation as to whether Mr Manuel will reduce the top rate of personal income tax or address the issue of the 12.5% secondary tax on companies, which raises the effective corporate tax rate to 38%.

Economists fear that although the general tone of the budget is likely to be optimistic, there may not be enough measures contained within the finance bill to encourage investment and stimulate growth, which has consistently lagged behind that of other developing countries, and is one of the main factors weighing on the volatile rand.

Speaking to Reuters, Dennis Dykes, the Chief Economist for Nedcor, a SA based financial institution, explained: 'While the anticipated focus on supporting economic growth at a time of global easing is encouraging, it is debatable whether the combination of moderate tax relief and targeted expenditure will have the desired effect.'

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