Finance Minister, Tito Mboweni, kicked off his Budget speech on Wednesday with positive news. No transfer duties were announced for houses under the R1 million mark. (Previously the threshold was R900,000.) Leadhome CEO, Marcél du Toit comments that: “This affirms what we are seeing in the market. There is a lot of activity on properties under R1 million.”
Before the budget speech, there was a lot of doom and gloom around possible increases in VAT and Capital Gains Tax (CGT). So it was great to see a decision in support of growth. No increases on VAT and CGT were proposed.
In fact, Mboweni explained that taxes will be reduced to offer real personal income relief. This is a smart decision and we hope to see this assist in stimulating the economy going forward. Du Toit says: “With the uptick in consumer confidence, we are betting on a recovery in the property market in the next 12 months.”
Du Toit states that it is also good to see the public wage bill being targeted. The trade unions are quite unhappy about this and the general concern is that service delivery could suffer. This is somewhat understandable as the public wage bill is what the government uses to pay its employees. The problem is that the public wage bill is too high relative to the stagnating gross domestic product (GDP) growth.
This is a concern because salaries tend to displace other important public expenditure needed for growth. Wage increases can open up the deficit even more if it is not accompanied by tax revenue growth. This is why both local and international markets are interested in the size of a country’s wage bill because it is linked to their fiscal health.
Mboweni proposed to tackle the massive public wage bill over the next three years. The focus not just being on bringing the vast total down, but to provide additional financial relief for the tax-paying citizens.
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