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Government must take foot off brakes to encourage economic growth

The government’s fiscal policy for 2018 is merely a balancing act aimed at survival and the country’s economy will only really get going once the government creates an environment that is conducive for economic growth.

At present, however, quite the opposite is happening as the government is putting the brakes on economic growth and prosperity with its policies.

South Africa is a country with contrasting economic conditions as it has a modern economy on the one hand and great social and economic challenges on the other.

Against this backdrop, there is only a very small tax base while the number of people that are dependent on social grants far exceeds the number of people that are employed. In essence, that means that South Africa is actually a welfare state.

This is not sustainable and therefore the government bears the responsibility of creating an environment that is favourable for economic growth. That can only be achieved by a responsible and effective government that establishes policy certainty and invests in economic infrastructure.

The 2018 fiscal framework proposed by the government will not achieve this. The government allowed corruption, plundering of the state coffers and incorrect prioritising to go on for too long.

It is unacceptable that capital expenditure was cut both on provincial and municipal level. Economic and water infrastructure must be invested in.

It is also absolutely necessary to expand the tax base. The increase of 1% in VAT ensures that the tax burden is evenly distributed as an alternative to raising personal and company tax, which will only exploit already heavily burdened tax payers even further.

It is also necessary to expand the list of zero percent VAT items to include more essential products, like sanitary ware and municipal rates.

The increase of 1% in VAT will have a lesser impact on the poor than the increase in the fuel tax. VAT will not affect the price of bread, but an increase in fuel prices certainly will. This is unacceptable seeing as there are no limits to fuel taxation.

South Africa needs economic growth and for that we need a free market system. That is the only way to ensure economic growth without the brakes of government intervention and expropriation without compensation.

 

Contact details: 082 674 6670 / 065 801 7216

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