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usinessTech reports that the Parliamentary Budget Office (PBO) has published its analysis of Finance Minister Tito Mboweni’s Medium Term Budget Policy Statement (MTBPS) and some of its tax implications.
The PBO provides independent, objective and professional advice and analysis to parliament on matters related to the budget and other money bills. In a presentation to parliament on Tuesday, the PBO noted that the MTBPS called for additional tax measures amounting to R40 billion over the medium-term to help consolidate the country’s finances, alongside a range of spending cuts. However, the PBO said some policy proposals in the MTBPS might worsen tax revenue collection if implemented – for example, the impact on Personal Income Tax (PIT) and VAT due to the reduction in the public sector wage bill. According to Mboweni, National Treasury would propose a three-year wage freeze in an effort to stabilise the spiralling public sector wage bill. The PBO noted, however, that public sector workers accounted for a relatively larger portion of PIT base because they comprised a larger share of the workforce and their earnings tended to be higher than their counterparts in the private sector. Consequently, the PIT tax base was potentially more sensitive to public sector pay policy decisions or level of employment. The PBO observed: “In times of public spending growth, it is generally recognized that public sector tends to offer greater job security than the private sector, yielding a steady stream of PIT revenue. However, in times of austerity, the tendency to impose policies directly aimed at reducing the public sector workforce size or capping pay can have a disproportionate effect on the PIT tax base.”
- Read the full original of the report in the above regard at BusinessTech
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