Government is on the brink of fiscal catastrophe – IRR report
IRR COO Gwen Ngwenya said the budget presented by the Minister of Finance yesterday suggested “a government at the brink of fiscal catastrophe and without a plan for either growth or austerity”.
In order to finance expenditure the minister introduced a bevy of tax proposals including a top marginal tax rate of 45%, a sugar and carbon tax, an increase in the fuel levy of 30c/l and in the Road Accident Fund levy of 9c/l. Ngwenya argues that, “the Treasury’s plan is an exercise in extracting blood from a stone by squeezing an already over bled tax base.”
According to Ngwenya, “Tax revenue as a proportion of GDP has increased from 21.9% in 1994/95 to a projected 29.8% in 2017/18. The state is therefore taking a greater proportion of the wealth generated in the economy. The implication is that the state believes it is able to spend more effectively and efficiently than consumers and the private sector.”
“A related point is that government expenditure as a proportion of GDP has increased from 26.4% in 1994/95 to a projected 33% in 2017/18. By international standards this is a very high level. Our data on the subject extends back to the 1960s and the current level is the highest on record.
“In 2008/09 debt levels bottomed out at 26% of GDP – more than twenty percentage points below the 1994 level. However, debt levels have since escalated sharply and now sit at 50.7% of GDP.”