The Medium-Term Budget Speech

//The Medium-Term Budget Speech

The Medium-Term Budget Speech

How many Budget Speeches can boast such a dramatic backdrop?  The Finance Minister faces fraud charges, his job61f7c540-be16-44f8-801b-e9351d31266c is in jeopardy and the fees must fall campaign seems to have no end in sight.  The embattled Pravin Gordhan has a herculean task ahead of him, and the mini-budget yesterday reflected that. In his own words, our economic environment is a “challenging, but not impossible one.”

What are the priorities?

Of course, the demand for funding for tertiary education remains centre stage in terms of government budget allocation. Following debt-servicing costs, this is the most urgent and fastest growing slice, with R17-billiion promised to students in the medium term.

In addition, a rating downgrade will signal a higher investment risk, most probably resulting in a higher cost of borrowing for South Africa, and large capital outflows.

Finally, the budget deficit still requires narrowing, though the Treasury seems optimistic in this regard.  This narrowing is vital to contain government debt.

Where will the money come from?

With the slowing of the economy, tax revenues are insufficient to meet fiscal objectives.  Spending will be cut and taxes increased. If this does not happen, the budget shortfalls over the next two years, respectively, willl be R36-billion and R52-billion.

Given that the February Budget Speech this year was ‘tax-light’, everyone has been anticipating new proposed tax measures to be announced in this medium-term budget policy statement.  While these increases are a reality, they only come into effect with the Budget Speech in February next year.  Nevertheless, your planners need to start making provision for additional revenue that you may need to meet your new tax obligations.  Of course, we await the specifics, but there is little doubt that personal tax of the wealthy and corporate tax are the most likely targets.

Please be aware that your planner is ever alert to conditions that may require the rebalancing of your portfolio, and, should you have current concerns, do not hesitate to contact him or her.

Warm regards
John Campbell

By | 2017-07-11T12:21:02+00:00 Oct 27, 2016|News|0 Comments

About the Author:

John Campbell
John is currently Chief Executive Officer at Chartered Wealth Solutions, where his main responsibilities are overseeing the day-to-day running of the business, financial planning and strategy implementation.

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