Zweli Mabhoza, Head of Tax Services at audit firm SizweNtsalubaGobodo, South Africa’s largest black-owned audit firm, believes the budget for the 2013/2014 financial year will be a particularly tough one for Finance Minister Pravin Gordhan. “The delicate balancing act the Finance Minister has to maintain, between remaining fiscally responsible (following recent downgrades in South Africa’s credit rating) and meeting the expectations of social upliftment, is going to be particularly tough in light of the tepid economic growth the country is currently experiencing,” says Mabhoza.

  

Mabhoza says he expects Gordhan will address the management of the fiscal deficit in his upcoming budget. “On the revenue side, I think he will continue to push compliance, focusing particularly on closing loopholes around transfer pricing in reference to the way multi-national companies price products and services between subsidiaries across borders,” he comments.

 

As we have already seen with the way in which the government has begun limiting deductions for medical aid contributions and retirement savings, Mabhoza also expects the Minister will continue to chip away at the amount of taxable deductions the wealthy enjoy, policing them as strictly as ever before. “I also anticipate that the manner in which trusts are governed will continue to be closely examined by tax authorities, with 2013 possibly proving to be a nasty year for tax evaders,” he adds.

 

However, Mabhoza doesn’t think the Finance Minister can be too harsh on the wealthy. “We simply cannot benchmark ourselves (in terms of public debt to GDP) with countries in the western world that have a much broader and deeper tax base. With high unemployment in South Africa, the burden falls on a relatively small portion of the public to finance the fiscus, so a hike to the top personal income tax bracket (to 50% or more as is the case in western Europe) is probably unlikely,” he explains.

 

While the idea of a mining tax has been widely mooted by government, Mabhoza thinks this too, is unlikely. “I think the Minister realises that further burdening the industry with another tax at a time like this, could only cause more damage to jobs and exports” he adds.

 

And while mining tax may be off the table for now, Mabhoza predicts the Minister will certainly attempt to address another of the mining industry’s bugbears, Eskom’s tariff proposals.

 

“With Eskom announcing at the recent tariff hearings that it has exhausted its capacity to borrow using government guarantees, and being left with no alternative but to request further tariff increases, I won’t be surprised to see government provide more assistance in this regard. So the stage looks set to see whether government can be successful at finding workable solutions to successfully navigate what looks to be a challenging financial year,” concludes Mabhoza.