State planning to do a lot with the extra cash

Phumza Macanda

Phumza Macanda

Those who were expecting Finance Minister Trevor Manuel to hint at tax cuts in his medium-term budget policy statement yesterday were sorely disappointed - the minister was silent on the subject.

"Mum's the word on the tax position taken next year," Manuel said.

All he was prepared to say was that "tax reforms over the medium-term would build upon past base-broadening initiatives and maintain and enhance the fairness of the tax system".

Efficient tax collection by the South African Revenue Service meant the treasury now had an additional R80billion in its coffers, bringing its budget for the next three years to R704billion.

And even with increased spending on transport and communications infrastructure related to the 2010 Soccer World Cup, the government expected a surplus in the 2007-08 financial year.

"The mere fact that they are expecting a surplus implies that tax breaks are not going to be substantial. The department of finance does not want to counter what the reserve bank is doing in correcting the structural imbalances in the economy," said ETM market analyst George Glynos.

But Brait economist Colen Garrow said the lack of tax cuts would help the reserve bank slow soaring consumer spending, which has seen debt levels rise to about 70 percent of household income.

With its extra money the government would boost housing and community development by R16,3billion and allocate an extra R3,5billion to crime prevention at a time when hijackings and cash heists are increasing.

Education, welfare and social services and health still topped the list of spending priorities. Money spent on education would rise by 10,3percent to R123,7billion over three years.

Welfare and social security spending was expected to grow by 9,8 percent to R56billion in the 2009-10 financial year, and the health budget would increase by 10,2 percent to R73,4billion.