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Authorised Financial Services Provider – FSP No: 859

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  1. Authorised Financial Services Provider – FSP No: 859

  2. 2009 Pre-Budget Presentation:“It’s Just a Jump to the Left” Presented by: Dawie Roodt 4 February 2009

  3. “It’s Just a Jump to the Left” • How your Tax Money is being spent? • Can the State afford the ANC Manifesto’s bill?

  4. Basic Economic System Production =100 Consumption = 100

  5. Economic Growth

  6. Year 1: Investment = 20 Production =100 Consumption = 80

  7. Year 2: Eco. Growth = 5.0% Investment = 22 Production = 105 + 2 Consumption = 83 + 3

  8. Economic Growth

  9. Things Certain in Life:Death & TAXES

  10. Year 1: - 5 Investment = 15 Production= 100 Taxes = 30 Consumption= 55 - 25

  11. Scenario 1: All Taxes are Invested Investment=15 = 45 Production= 100 + 30 Taxes = 30 Consumption= 55

  12. Year 2: Eco. Growth = 10.0% Investment=18 Production = 110 + 3 Taxes = 30 Consumption= 62 + 7

  13. Economic Growth Scenario 1

  14. Scenario 2: All Taxes go to Expenditure Investment=15 = 25 Production = 100 + 10 Taxes = 30 + 30 Consumption= 55 + 20 = 75

  15. Year 2: Eco. Growth = 7.0% Investment=17 Production= 107 + 2 Taxes =30 Consumption= 60 + 5

  16. Economic Growth Scenario 1 Scenario 2

  17. Scenario 3: Efficiency Loss Investment=15 Production= 100 + 7 = 22 Taxes = 30 !Efficiency Loss! + 30 + 25 Consumption= 55 + 18 = 73

  18. Year 2: Eco. Growth = 6.0% Investment = 17. Production= 106.0 + 2 Taxes =30 Consumption= 59 + 4

  19. Economic Growth Scenario 1 Scenario 2 Scenario 3

  20. Year 2: Eco. Growth = 6.0% Investment= 17 Production = 106.0 • Consumption > Production • CA Deficit • Currency Volatility • Pressure on Prices, i.e. Inflation • Upward Pressure on Interest Rates Taxes = 30 Consumption = 59 Want80as before !! !!! =127 =106

  21. Adverse Impacts…

  22. Undermining the Economy EXTERNALLY INTERNALLYThe State Takes from Savers – Gives to Spenders CA Deficit Interest % Savings Inflation Rand

  23. In Reality….. Source: SARB, Efficient Research 2008

  24. But in Reality… SCRAPPED ??

  25. What if Company Tax Scrapped? R 2020 bn 5.1% + 0.9% = 6.0% 6 yrs R537bn R422bn + 0.63*R137bn = R422bn + R87.5bn= R509.5bn

  26. Therefore, Needed • Higher Savings: • Lower Corporate Taxes • Lower Personal Income Taxes • Less Social Expenditure: • 12m+ Grants Recipients • Education Results ?? • Focus on State Efficiency • More Focus on Capital Expenditure/ Productive Capacity

  27. Treasury’s Playground:2008/09

  28. Comparing Apples with Apples…2008/09 (Budget) SA Reserve Bank National Treasury Main Budget Revenue 625,4 Expenditure 611,1 Balance 14,3 + Social Security Revenue 24,7 Expenditure 20,5 = Consolidated National Budget Balance 18,5 National Government Finance Revenue 625,4 Expenditure 611,1 Balance 14,3 + Social Security = Consolidated Central Government + provincial + local government = Consolidated General Government + public enterprises = Non-financial public sector? 0.6% of GDP 0.8% of GDP

  29. Three Spheres for Revenue Provincial Motor vehicle licenses Casino (gambling) taxes Liquor licenses Fuel levy? Local Property rates RSC levies (prior to 06/07) National PIT, CIT, VAT, Fuel levy Source: 2008 Tax Statistics,National Treasury and SARS

  30. Revenue

  31. Revenue

  32. Revenue Categories Strong Demand Economic Activity,Commodity Cycle Wage Increases,Inflation… 12.0%

  33. National Tax Revenues

  34. Registered Income Tax Payers 75% Total CIT paid by 1.2% companies 45% Total PITpaid by top 5.0% Source: National Treasury & SARS, 2008, business Day 3 Feb 08

  35. 2008/09 in Review:Revenue

  36. Reasons for Under Shooting • Individual tax • High wage and salary negotiations (wage inflation) • Company tax • Commodity prices (“Two halves” of 2008 – commodity boom/bust) • STC • Retained income • VAT • Consumption expenditure plummets

  37. Total Budget Revenue • Interest • Dividends • Rent on land • Sales of good and services • Fines and penalties • Botswana, Lesotho, Namibia, Swaziland (BLNS) • Similar excise and customs (import) duties • Revenues pooled and distributed based on formula Source: 2008 Tax Statistics,National Treasury and SARS

  38. SA Contributions to and received from SACU Pool Source: 2008 Tax Statistics,National Treasury and SARS

  39. SACU Revenue Share Formula • Customs component • Country’s share of intra-SACU trade, including re-exports • Excise component • Based on GDP, net of development component • Development component • Set at 15% of total excise pool • GDP p.c. vs average SACU GDP p.c. • GDP < SACU average: compensated Source: 2008 Tax Statistics,National Treasury and SARS

  40. SACU Economic Indicators Source: 2008 Tax Statistics, IMF, own calculations *Calculated using average R/$7.05

  41. Expenditure “Budget priorities for the period ahead are focused on social solidarity and building a more equitable society” (Source: 2008 MTBPS)

  42. Expenditure Rein in Expenditure Lower foreign debt

  43. Spending Priorities

  44. Social Expenditure Source: Various budgets, own calculations

  45. 2008/09 in Review:Expenditure * Includes: Provincial and local government

  46. Balance/Debt

  47. Revenue and Expenditure

  48. Fiscal Balance Source: SARB Forecast: Efficient Group

  49. State Debt Domestic debt: R485.5bn Foreign debt: R81.9bn Source: SARB Forecast: MTBPS, Efficient

  50. The Grey Area- Applying Monetary Policy the Fiscal Way! ‘Loss’ paid by State to SARB: Interest received = 3% Interest Paid = 8% “Cost” = R3bn Liquidity drainage Source: SARB, Treasury