In order to cut government expenditure and save billions of rands, the size of the cabinet had to be reduced drastically, a tax expert from PricewaterhouseCoopers said on Tuesday.
“To really make a dent in terms of government expenditure, you are going to [have to] see a reduction in the size of the cabinet, government departments and eliminate those unnecessary departments and merge those that share similarities,” tax policy leader Kyle Mandy told reporters in Johannesburg.
“That’s the only way to see reduction in government expenditure in the billions.”
Mandy was speaking to reporters in anticipation of the budget speech, and looking at what the minister would announce to the nation. He said the economy was under pressure and needed new ways to raise money.
Mandy said tax revenues for 2016/2017 were expected to fall by approximately R10bn in the absence of further tax increases.
“Expenditure has increased astronomically since the world economic meltdown. The increase in expenditure is putting pressure on the GDP,” he said.
During his state of the nation address, President Jacob Zuma said government would find ways to cut spending. He mentioned cutting down on travel costs for delegations going abroad, but Mandy said such measures would only save government millions instead of billions.
Mandy added that treasury would have to find ways to raise funds. One way would be with a hike in personal income tax liability.
“The tax rate for individuals is expected to be increased by 1% in each of the bands, with the exception of the lowest, taking the maximum marginal rate of tax to 42%,” he said.
Mandy said the sale of state-owned companies would not alleviate the financial strain currently being felt.
He said the relief would only be temporary.
“Privatisation has the potential to raise funds on a once-off basis, which can be used for investment in infrastructure or as a means of reducing government debt. It shouldn’t be used to fund consumption expenditure. But state-owned enterprises have a role to play in driving growth, particularly those key ones like Eskom,” Mandy said. — News24