Budget 2018 - Do Nothing in the face of Crisis

[Philip Copeman]

In summary the problem with the 2018 Budget is that it does nothing in the face of a crisis. This is not a budget, it is a stop gap to the 2019 elections. The Minister of finance is running in circles in a designer suite, playing musical chairs and the music is about to stop.

Our crisis is 1% growth, 26% unemployment and a deficit of R 2,5 Trn.

Let me say that again for the inattentive:

Our crisis is 1% growth, 26% unemployment and a deficit of R 2,5 Trn.

In the face of this, from the team that should be leading us out of the woods, our response is a limp and sure to be ineffectual budget. We are not even forecasting a success! We are forecasting a R 191 Bn step towards a R 2,5 Trn calamity and it is likely to be worse. Shivambu says it – we have no plan. (He should know - he also has no plan).

It is hard to see VAT collections being R 70Bn higher next year than this year, 15% or Laffer curve not. To actually get the benefit of the VAT increase, you have to get a 20% increase in the sale of Vatable products. It ain't gonna happen. Unemployed consumers don't spend and threatened business people emigrate and spend on foreign goods. From the moment CR mentioned “without compensation” future tax revenues and future employment prospects started to plummet.

Read the numbers carefully. The budget highlight - R 57 Bn on free education - is not R 57 BN, but actually only R 19 Bn a year. Think of this as extending social grants to one million students ( just over R 1,000 per month each) – except they don't actually get the money -it goes to pay ANC cadres working at Universities. Its simple to see where the money comes from. We take it from the other 11 Million grantees and give them a below inflation increase - R183.5 Bn.

We are starting to markusjoosticate the numbers. We are forecasting a 1% increase in GDP and a mystical 8% increase of R 110 Bn in tax revenues - ( R1,24 Bn to R 1,345) Which is going to take a VAT jump of about 100% on revenues. And deferring accounting for interest by a year – R 194,2 Bn (standard EBIT trick by accountants). This after previously missing the forecast by R 50 Bn. My quick estimate (possibly - ill- informed- stab-in-the- dark- estimate) is that we are doing creative accounting on about R 150 Bn or around 12% of our fiscal collections. (R50 Bn from 2017 which we are admitting to on year later, R 50 Bn from 2018 which we still have to report and R 50 Bn from 2019 which is dreamland.)

Don't look at me – take a look at the VAT numbers that come from SARS – Our last VAT reported collection 2017 at 14% R 289 BN – our fore cast for 2019 R 348 Bn that is a R 60 Bn increase or 20% on a increased rate of 1/14 or 7% and a GDP forecast of 1%. Doesn't add up. These numbers look like a ducktape fix to get us through to the 2019 elections.

This is a time for action, Radical Economic Transformation - not muddling. Here are five Rs to follow

R etrench one third of the Government workers to become tax makers, not tax takers;

R esdistribute the Land parcels in place of grants;

R evise VAT laws to favor SME Businesses.

R educe deficit spending until it is a surplus and do it now.

R eplace the racist legislation with anything that stimulates growth.

[Philip Copeman]

2017%20Tax%20Statistics%20-%20Value%20Added%20Tax%2010%20Year.xlsx

SARS VAT tables to cross check my numbers.