By Lehlohonolo Lehana.
There will likely be no surprise tax increases at this year’s Budget Speech aside from some possible inflationary adjustments to personal income tax brackets, this is according to Liberty economist Zandile Makhoba.
Finance Minister Enoch Godongwana is expected to table the government’s 2023 Budget on Wednesday, 22nd February.
Makhoba says the Minister is aware that South Africans are struggling with household finances, and he will be sensitive about putting further pressure on consumers.
She says many people have not seen significant salary increases, so the likelihood of bracket creep, where someone moves into a higher tax bracket because of salary growth, is minimal.
However, in terms of offering consumers relief, she says the Minister has little room to manoeuvre because optimising revenue collection is critical under the current circumstances.
Difficult realities
“Unfortunately, some lessons were learnt in 2022 in terms of introducing tax relief. The fuel levy relief was reversed too quickly for households to truly benefit. While there may be efforts to provide some respite, the Minister is likely to be cautious of significant revenue loss.
“This raises an interesting question about the state of welfare grants: If these grow by inflation, while revenue collection is expected to slow, it suggests there will have to be budget reallocations or else a widening budget deficit. This is not a good time to be looking to borrow, but it is also hard to tell where funds could be reallocated from.”
Makhoba says consumers can also anticipate further details on energy infrastructure investment incentives following the president’s initiative revealed earlier this year.
How to plan your household budget in these tough times
“Just like the Minister’s budget, it makes sense for individuals to plan their own spending budgets for the year and have a firm plan in place for their personal needs. Consumers may have to cut back on certain luxuries like entertainment in order to afford more important things like school fees,” says Sheila-ann Robey, Liberty Financial Adviser.
These predictions of the Minister’s budget make it clear that these are tough times for everyone and even the government is looking at borrowing to cover the holes created in their spending wake.
Robey cautions against taking on more personal debt, saying, “People should avoid debt at all costs. Do not take on more credit! Borrowing from one source to pay another, seems like the easiest way to alleviate the situation in the short term, but it creates a far greater challenge to overcome in the longer term.”
If you are struggling financially right now, she advises asking for help.
“This does not mean seeking out help from friends or family in the form of a hand-out, but to seekprofessional advice on how best to manage your finances. Seeking assistance also gives you the space to unpack the negative emotions associated with financial stress with a trusted financial adviser,” she says.
Seek out small savings to make a big difference.
Kobus Kleyn, another Financial Adviser at Liberty, says some of the best ways to manage ever increasing household bills are to identify possible cost reduction opportunities:
“Small savings on electricity, water, petrol, and food expenses can be found simply by being more cautious and conscious. Turning off lights when leaving the room and making sure there are no leaks or taps left running in the house, are two great examples to start reducing household expenses.”
He also suggests approaching your bank or school to enquire about payment holidays or payment assistance relating to large amounts that you may owe.
Kleyn says it’s important to decide what you really need and what you don’t.
According to Kleyn, these trying times are also the riskiest, the less you have. This is the reason consumers are advised to also invest in financial solutions cover them when problems strike. “Keep your insurance on your health, income, life, and valuables. If you need to cut costs, reach out to your provider or adviser to help you find ways to do so. That consultation can help you find a bulking option or cut on accessories that you might have overlooked in your cover, “he advised.
“Any kind of financial upset can set you back, but don’t cut back on cover that is already in place to protect you, it can be a lifesaver in trying times,” says Kleyn.