Deputy finance minister warns of wage freeze, 'looming fiscal crisis'

[Jopie Fourie]

With government borrowing more than R1.2bn a week to meet expenses, deputy minister of finance David Masondo has proposed a state wage freeze to curb costs.

"We also have to look at a wage-freeze starting with us public office bearers at all levels of the state if we are to seriously tackle our looming fiscal crisis," Masondo said in an address to fund managers and other investors earlier in the week. Compensation now accounts for more than 35% of SA's consolidated public spending.

"Our tax revenue is very low mainly due to low economic growth; and the institutional challenges at SARS associated with what is now known as state capture have affected revenue collection.

"Raising taxes in the context of low economic growth is not an option. Growing the economy is the only option in order to build a broader economic base for revenue generation."

Deputy finance minister warns of wage freeze, 'looming fiscal crisis' | Fin24

A wage freeze at all levels of the state should be considered, says David Masondo.

www.fin24.com

 

[Jopie Fourie]

Lol

Buckle up, the s**t's about to get real.

Wonder where they "borrow" the R1.2bn a week from. Definitely not the West and recently confirmed neither from China too.

 

[Jopie Fourie]

While Masondo did not specifically refer to the term prescribed assets – a proposed policy that would compel pension funds to invest a portion of their funds in bonds issued by government and state-owned enterprises – he spoke about "unleashing" the full potential of pension fund money.

Instead of borrowings being used to "deliver a greater return to society," the deputy minister said much of the capital raised was going to state-owned entities.

"Currently a significant part of our expenditure goes to the wage bill and bailouts of our state-owned companies, with Eskom being one of the biggest recipients of government recapitalisation. These bailouts have become unaffordable."

Seems the ANC is hell-bent to get their hands on private pension funds.

Do it. You are too late to take mine though. I am sure there are some people who did not pay attention to the warnings. Take their pensions for SOE's.

 

[SaiyanZ]

"Raising taxes in the context of low economic growth is not an option. Growing the economy is the only option in order to build a broader economic base for revenue generation."

Didn't they just raise VAT by 1% a year ago, introduced the super tax bracket from March 2017, as well as haven't increased the income tax brackets by inflation for the last three tax cycles.

Taxes have just been raised in almost every way possible and this dummy is acting like its something that they don't want to do or haven't just done.

 

[3WA]

Don't freeze the army's wages. Then use them in the upcoming riots.

 

[Brenden_E]

Didn't they just raise VAT by 1% a year ago, introduced the super tax bracket from March 2017, as well as haven't increased the income tax brackets by inflation for the last two tax cycles.

Taxes have just been raised in almost every way possible and this dummy is acting like its something that they don't want to do.

Fiscal cliff has been reached. I think it was about 2 or 3 months after the VAT increase, revenue collected fell lower than levels before the increase.

Economy is in the shitter, high networth individuals are leaving en masse and the remaining poor sods that are taxed to death are actively looking at avoiding taxes. Buckle up - the **** show is about to get real.

 

[saturnz]

What do they mean tax revenue is low, it's twice the amount it was ten years ago.

 

[supersunbird]

What do they mean tax revenue is low, it's twice the amount it was ten years ago.

10 years ago they didn't need to bail out Eskom, SABC, SAA and whatever else, they just had to bail out SAA back then.

 

[saturnz]

10 years ago they didn't need to bail out Eskom, SABC, SAA and whatever else, they just had to bail out SAA back then.

thats irrelevant to the point, the tax collection is still double what it used to be, by definition that can't be described as low

 

[ToxicBunny]

thats irrelevant to the point, the tax collection is still double what it used to be, by definition that can't be described as low

It's lower than projections... Aka they are not collecting as much as they thought they would due to non compliance, tax dodging, a shrinking tax base etc etc

 

[Priapus]

Lol

Buckle up, the s**t's about to get real.

Wonder where they "borrow" the R1.2bn a week from. Definitely not the West and recently confirmed neither from China too.

You really need a holiday...

 

[saturnz]

It's lower than projections... Aka they are not collecting as much as they thought they would due to non compliance, tax dodging, a shrinking tax base etc etc

the point I'm making is simple, if your tax collection was R500bn 10 years ago and its over R1T now and you are complaining its "low" then the problem is not the tax collection as supersunbird has suggested, this is just manufacturing a narrative.

 

[saturnz]

Lol

Buckle up, the s**t's about to get real.

Wonder where they "borrow" the R1.2bn a week from. Definitely not the West and recently confirmed neither from China too.

usually the government sells bonds, these are simply IOUs, they can either sell it to the Reserve Bank or the Reserve Bank on behalf of the government has auctions of the bonds. I'm not up to date on the fine details but thats what I think they are referring to by "borrow"

 

[Jopie Fourie]

What do they mean tax revenue is low, it's twice the amount it was ten years ago.

Today, back in 2008, the Rand was at R9.38 to the Dollar. Today, it is R15.12 to the Dollar. So, all foreign debt has increased tremendously in terms of what they need to repay simply due to the declining currency. Unfortunately, the economy is in decline too. Businesses earning less, retrenching more, tax payers fleeing the country, so SARS is generating less income from Tax Payers.

In addition to this, over the past 10 years government increased a number of taxes, introduced a number of new taxes, increased VAT. Unfortunately, for the ANC, this was not the solution. Even with the increases, other factors such as inflation, more pressure in terms of a growing population, increasing grant applicants, and much more, raising these taxes caused them to generate less income.

 

[saturnz]

Today, back in 2008, the Rand was at R9.38 to the Dollar. Today, it is R15.12 to the Dollar.

still has absolutely nothing to do with my point

 

[ToxicBunny]

the point I'm making is simple, if your tax collection was R500bn 10 years ago and its over R1T now and you are complaining its "low" then the problem is not the tax collection as supersunbird has suggested, this is just manufacturing a narrative.

Oh I agree with your point but the narrative is accurate for a point in time in so much as the expected collections based on existing models have overestimated what tax revenue would be collected.

 

[saturnz]

Oh I agree with your point but the narrative is accurate for a point in time in so much as the expected collections based on existing models have overestimated what tax revenue would be collected.

yeah thats another layer of the onion that would need to be unpeeled, that target is not exactly based on models that are sound, they are at best the best estimates, but that means nothing.

 

[NarrowBandFtw]

R1.2bn a week to meet expenses?!?

F-me, you don't solve that with wage freezes sir, you solve it with deep cutbacks and mass retrenchments at a bare minimum.

 

[Scooby_Doo]

still has absolutely nothing to do with my point

It's all relative bud, there is nothing magical about 1T Rand's.

It's low compare to projections. It's low compared to what it could have been without zoooma. It's low compared to what it could have been with out load shedding.

Comparing 500million to 1 trillion without context is fruitless. With that line of thinking Zim was a power house with their quadrillions of dollars.

 

[saturnz]

It's all relative bud, there is nothing magical about 1T Rand's.

It's low compare to projections. It's low compared to what it could have been without zoooma. It's low compared to what it could have been with out load shedding.

Comparing 500million to 1 trillion without context is fruitless. With that line of thinking Zim was a power house with their quadrillions of dollars.

inflation has not been through the roof, so most of that 100% growth is "real" over a period of 10 years, meaning that revenue effectively doubled. In the finance world thats a big move whichever way you cut it.

we can talk counterfactuals all day, once again meaningless, projections are not exactly science or facts in this context- in my view they are closer to thumb sucks