If you pick up a packet of cigarettes, you could be forgiven for thinking the RIP printed on the side of the pack refers to the health hazards related to smoking. In fact, it stands for Reduced Ignition Propensity and informs you that these nicotine sticks have been specially designed to die out more easily to lessen the risk of fire caused by discarded cigarette butts. This might not seem to have anything to do with the national budget, but it is one of many fascinating snippets of information revealed by Professor Matthew Lester, author of Tax Talk in the Sunday Times, during a National Budget Discussion presented at the University of the Free State on March 5.
Lester says while many people seem to have written this year’s budget off as a non-event, preferring to focus instead on the Oscar Pistorius saga, he considers it a very significant budget. He says: "A lot of people missed the point of last week’s budget, which showed that the three biggest taxes in South Africa cannot grow more than by inflation in the future. “As a result we are looking at the implementation of carbon emission taxes from 2015.”
The three major income generators for the taxman are individual tax, corporate tax and Value Added Tax (VAT). He says things like sin taxes or the fuel levy and so forth only make up a tiny percentage of the total tax base. According to Lester, South Africa is the eleventh biggest polluter in the world, producing 500 million metric tons of carbon per year. He estimates the carbon tax to increase the taxman’s revenue by about R60 billion per annum, based on a calculation of R120 per ton. This would make it the fourth biggest source of tax revenue in SA.
Lester also touched on what he terms "the big V in tax". He says Zwelinzima Vavi has an incredible powerbase, namely Cosatu. "Government has to appease Cosatu because they are part of the tripartite Alliance." He says Cosatu has some very definite stances on VAT, toll roads and the Youth Employment Subsidy, saying a very adamant no to all of these. "The budget has got to be gentle on Vavi… He’s the opposition when it comes to tax," he says.
Lester raised numerous other pertinent issues, employing innovative explanations to put things like allocations into perspective. For example, he divided all the different expenses and tax spend likely to be encountered by an individual into a calendar.
His explanation reveals that out of an entire year, only one day is dedicated to the environment; only R7-billion out of the nearly R1-trillion budget. "Everyone’s talking about it but it doesn’t reflect in the budget… But then people can’t eat pretty scenery," he says.
Lester says another very important aspect of this year’s budget relates to changes to trusts. He says they are going to "relook" at trusts and believes this is going to cause total chaos. Farmers in particular are going to have to change the way they do business as the trust changes come into effect.