Budget 2023: No significant tax increases predicted but consumers should tighten their belts
There will likely be no surprise tax increases announced during this year’s budget speech, aside from possible inflationary adjustments to personal income tax brackets.
This is according to Liberty economist Zandile Makhoba.
Finance minister Enoch Godongwana is expected to table government’s 2023 budget on Wednesday.
Makhoba said the minister is aware South Africans are struggling with household finances, and he will be sensitive about putting further pressure on consumers.
She said many people have not seen significant salary increases so the likelihood of bracket creep, when someone moves into a higher tax bracket because of salary growth, is minimal.
However, in terms of offering consumers relief, she said the minister has little room to manoeuvre because optimising revenue collection is critical.
“Unfortunately lessons were learnt in 2022 in terms of introducing tax relief. The fuel levy relief was reversed too quickly for households to truly benefit. While there may be efforts to provide some respite, the minister is likely to be cautious of significant revenue loss.
“This raises an interesting question about the state of welfare grants. If these grow by inflation while revenue collection is expected to slow, it suggests there will have to be budget reallocations or a widening budget deficit. This is not a good time to be looking to borrow, but it is also hard to tell where funds could be reallocated from.”
Makhoba said consumers could also anticipate further details on energy infrastructure investment incentives after President Cyril Ramaphosa’s initiative revealed earlier this year.
How to plan your household budget in tough times
“Just like the minister’s budget, it makes sense for individuals to plan their own spending budgets for the year and have a firm plan in place for their personal needs. Consumers may have to cut back on certain luxuries like entertainment to afford more important things like school fees,” said Sheila-Ann Robey, Liberty financial adviser.
The budget predictions make it clear these are tough times for everyone, and even government is looking at borrowing to cover holes created in its spending wake.
Robey cautioned against taking on more personal debt, saying: “People should avoid debt at all costs. Do not take on more credit. Borrowing from one source to pay another seems like the easiest way to alleviate the situation in the short term, but it creates a far greater challenge to overcome in the longer term.”
If you are struggling financially, she advised asking for help.
“This does not mean seeking help from friends or family in the form of a handout, but seeking professional advice on how best to manage your finances. Seeking assistance also gives you the space to unpack the negative emotions associated with financial stress with a trusted financial adviser.”
Small savings make a big difference
Kobus Kleyn, another financial adviser at Liberty, said one of the best ways to manage ever increasing household bills is to identify possible cost reduction opportunities.
“Small savings on electricity, water, petrol and food expenses can be found by being more cautious and conscious. Turning off lights when leaving the room and making sure there are no leaks or taps left running are two examples to start reducing household expenses.”
He also suggested approaching your bank or school to enquire about payment holidays or payment assistance relating to large amounts you owe.
Kleyn said it is important to decide what you really need and what you don’t.
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