Gordhan warning on tax rise

TAX rates might have to rise if the pressure on South Africa's Treasury does not ease as anticipated, Finance Minister Pravin Gordhan warned MPs yesterday.

Briefing Parliament's finance committee, he said no tax hike was imminent, but nor could one be ruled out.

"There is no immediate decision to raise taxation. All we are saying - in the spirit of transparency and openness - is that the rest of the world is also looking at this issue.

"So, if we aren't able to manage our finances, if we don't see the economy progressing as we think it will progress, that could be an eventuality.

"We don't know whether it is going to be (an eventuality) at this point in time. If we change our minds, you'll know on the 17th of February," he said in a reference to his first Budget presentation next year.

In his Medium Term Budget Policy Statement on Tuesday, Gordhan predicted a R70billion revenue shortfall for the current financial year as a result of the recession, falling exports and lower consumption.

Tax rates have fallen steadily since the advent of democracy in 1994. Over the six years until the recession hit last year, the Treasury has handed out tax breaks worth about R70billion and the corporate tax rate has fallen from 30% in 2004 to 28% now.

Gordhan increased the budget deficit forecast for the current financial year to 7,6% of gross domestic product, but said the Treasury would pay off the borrowings as soon as possible.

Treasury director-general Lesetja Kganyago reaffirmed yesterday that the high deficit was temporary.

"You can't continue at that level infinitely. Yes, we had a big gap this year, there was nothing we could do, so we filled it up with borrowing. But over the next three years we are going to have to run a tight ship in order to return to a more comfortable fiscal position."

Gordhan urged MPs to encourage debate about economic policy, but said the government should learn to walk before it could run.

"In government, like elsewhere, we've got to start doing some basic things right."