The Budget of the Government of National Unity is the result o f a transparent and inclusive process of consultation with many stakeholders in the country. Elected representatives at the national and provincial level were consulted directly as were business and labour via the National Economic Development and Labour Council (better known as NEDLAC) or through various bilateral discussions.
This is the second year that the Citizen's Guide is made available in all 11 languages. It is a short summary of the most important aspects of the budget.
IS THE BUDGET OF GOVERNMENT MUCH DIFFERENT FROM MY BUDGET?
No. Basically both deal with an estimate of income and expenditure (spending) for a period.
Every person or family has or should have a budget. To ensure that we do not spend more than we can earn, we have to divide our limited income between our numerous needs.
Not many of us will have enough income to buy large items such as houses or equipment (called capital goods), and therefore we borrow from banks and pay interest on these loans. It is not a sound policy to borrow money to buy food and clothes. Also if too much is borrowed, people find it difficult to repay loans and the interest on them.
WHAT IS FISCAL DISCIPLINE AND WHY IS GOVERNMENT SO CONCERNED ABOUT IT?
The GNU has chosen a policy o fiscal discipline. Fiscal discipline means that Government must spend in a responsible way so that it does not contribute to rising prices (inflation), or rising rates of interest. Such increases in spending lead to excessive borrowing on which we must pay higher interest costs, leading to less money being available to spend on urgent needs. The people who then suffer most are generally the poor and unemployed. Interest is the second largest item on the budget, second to Education.
The better Government manages the money which the citizens put at its disposal, the better the confidence in the economy. This confidence is necessary for South African and foreign businesses to invest in production and jobs.
Government regards the current level of the budget deficit as too high, and plans to bring it down. This will be done by limiting our borrowing and making sure that taxpayers' money is spent efficiently. We need better value for each rand spent.
Another possible way to decrease the budget deficit is by increasing taxes. Tax rates on individuals and companies are however already high. If the rates are increased further, it will leave people with less money to spend or to save. Businesses may also reduce investment leading to fewer jobs. But we want people to have jobs and to be able to spend to improve their lives and to save so that saving can be invested for even more job creation.
WHAT ARE THE BUDGET TOTALS MR 1996/97)
For 1996/97 Government budgeted for total expenditure of R173,7 billion and income of R144,9 billion. The budget deficit is therefore R28,8 billion.
WHERE DOES GOVERNMENT'S INCOME COME FROM?
The most important sources of revenue (income) of Government are taxes and loans. A tax is a compulsory payment to Government to help pay for its services. There is, however, no direct link between the amount paid in taxes and the level of services an individual can expect. The following diagram shows where every rand of Government will come from in 1996/97.
HOW DOES GOVERNMENT SPEND ITS INCOME?
The exact amount to be spent on the various categories in 1996/97, such as housing, education and health will only be available later this year. We need the provinces to present their budgets in which they will show their priorities. The diagram below shows how every rand of income was spend in 1995/96:
HOW DOES THE INCOME SIDE OF THE BUDGET AFFECT US?
The budget affects us all through the taxes that we pay.
All individuals who earn more than 15 580 per year pay this tax. People older than 65 years only start to pay when they yearly income is more than 27 907. Persons who earn less than R50 000 per year need not complete tax return forms. This system is called the Standard Income Tax Employees (SITE).
This tax is levied on goods and services that we buy at a rate of 14 per cent, in other words 14c for every R1 we spend. On some goods VAT is not payable. Such goods are mainly exports and a limited number of basic food items like maize meal, brown bread, vegetables, fruit, milk and eggs. There is no change in this tax rate this year.
The tax is to be increased by 3 cents per litre on petrol and diesel as from 3 April 1996 bringing it to 65,9 cents on petrol and 58,4 cents on diesel.
Excise duties are put on certain non-essential goods that are produced domestically. These duties are usually increased every year. The most important increases this year are about 2 cents per 340 ml can of beer, about 64 cents per 750 ml bottle of spirits (whisky, brandy, gin), about 3 cents per 340 ml can of cider, 0,5 cent per litre of sorghum beer, about 4 cents per 750 ml bottle of unfortified wine and some 8 cents per 10 cigarettes. There will be no increase in excise duties on cold drinks.
These increases will apply immediately and are based not only on the rate of inflation, but also on past differences between, and circumstances in the individual industries, as well as health considerations.
Businesses registered as companies, pay income tax equal to 35 per cent of their taxable income if they declare no dividends. Dividends paid to shareholders are taxed at 25 per cent. For 1996/97 dividends will be taxed at 12,5 per cent.
HOW DOES THE EXPENDITURE SIDE OF THE 1996/97 BUDGET AFFECT US?
We all benefit from the different categories of expenditure shown in the above diagram.
The Budget is a powerful tool to accomplish the goals of the RDP. An important goal is to change Government's expenditure in such a way that eventually we all have equal access to the services that Government provides, such as education, health, welfare, water and electricity.
As was the case last year, Government will again this year set aside an amount from the Budget that will be used for RDP projects. Last year we set aside R5 billion, and this year we will set aside R7,5 billion. So far R15 billion has been set aside for RDP projects.
Many steps are taken in the 1996/97 Budget to promote development. These include:
A large section of our population benefits from Government's expenditure on Welfare.
THE BUDGET AND THE ECONOMY
Because of government's size its budget not only has the fiscal effects discussed above but also has an impact on the whole economy. Our main objectives are to ensure efficient expenditure, address poverty, manage our debt wisely, keep inflation down and create confidence in the Government's ability to manage a very difficult economic situation.
These policies are proving successful. The growth of the economy has increased from 2,7% in 1994 to 3,3% in 1995 and for this year growth of between 3,5% and 4% is expected. Both inside the country and outside there is growing confidence in our policies. This is the Government's third Budget and it should further strength our record of good management and achieving a balance between encouraging job-creating growth whilst bringing about development.
SOURCE: Published by the Department of Finance. Printed copies may be obtained by calling: (012) 315 5777.
This guide is also available in: Afrikaans, N/Sotho, Ndebele, Sesotho, Siswati, Tsonga, Tswana, Venda, Xhosa and Zulu.