FCC warns that tax hikes could lead to increased tax evasion
The Financial and Fiscal Commission told Parliament that increased taxes were most likely to hobble an already limping economy and also impact on revenue collection as consumers were forced to rein in their spending.
CAPE TOWN - More tax hikes for hard-pressed South Africans were unlikely to have the desired result, the Financial and Fiscal Commission has warned.
The commission told Parliament that increased taxes were most likely to hobble an already limping economy and also impact on revenue collection as consumers were forced to rein in their spending.
Finance Minister Tito Mboweni hinted last week at further tax increases when he delivered his Medium-Term Budget Policy Statement.
Briefing Parliament's four finance and appropriations committees on Tuesday, the FFC warned this could also lead to greater tax avoidance or tax evasion.
The government plans to spend R5.7 trillion over the next three years but its revenue for the period is set to be only R4.6 trillion, so there’s a big hole to fill. The Financial Fiscal Commission said that raising taxes may not help.
The Commission’s Nomfundo Vacu: "There's scope for increasing government revenue by raising taxes is becoming smaller because tax hikes are unlikely to have a negative impact on the economic performance hence on revenue collection, as consumers are forced to economise on their purchases."
Additional increases in the marginal tax rates for personal income tax could also lead to an increase in the number of people either trying to dodge paying any tax at all or to pay less.
"This warrants a sustained increase in required economic growth and employment to improve the revenue collection for the government to meet its socio-economic objectives."