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Nene: 'SA must be realistic'

Feb 11 2009 19:26 Nolulamo Matutu

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Johannesburg - Treasury's decision to hike up spending even though tax revenues are set to decline in 2009 has been informed by reality, says Deputy Finance Minister Nhlanhla Nene.

"We have to be realistic when it comes to how far we can go," he told Fin24.com in an interview.

Companies are going to bring in less revenue as growth slows but Nene says tampering with corporate taxes amid a global financial and economic crisis would not have been appropriate.

He noted that treasury's lower projected growth rate of 1.2% for 2008 - compared with the 3% projected in last year's mid-term budget in October - is brought about by the slowing export demand and drop in global demand for South African products.

When explaining the 3.8% budget deficit after three years of surpluses, Nene said: "We needed to continue with our stated objectives of protecting the poor, building capacity for long term growth, sustaining employment and maintaining a sustainable debt level."

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- Fin24.com

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js
Feb 11 2009 22:03 Report this comment

Sensible stuff. A good budget all in all. Keep building infrastructure while times are tough when the world eventually comes out of recession we'll be ready/.

Nasdaq7
Feb 11 2009 19:26 Report this comment

Yes you don't tinker and toy with corporate taxes during a global slowdown because you don't know what the revenue might be. You might reduce it by 1% - but the slowdown might be so severe that your shortfall in taxes could be even worse, say 3%,4%. So just to make accounting and projections easier, don't change corp tax - although it might have helped many companies survive. Lowering income taxes to stimulate demand is much easier and quicker because companies take time to build up inventories.


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