Minister Pravin Gordhan and his team at National Treasury should be praised for striking the correct fiscal balance in this year's budget. Gordhan understands that fiscal rectitude is necessary for the growth and transformation of South Africa's economy.
Gordhan will contain government spending and raise the tax rates to be paid by well-off South Africans. He is also planning to make it harder for South African-based businesses to shift their profits offshore to avoid paying taxes in this country.
It is widely understood that there are limits to how far taxes can be raised, but in current circumstances it is preferable that Gordhan has chosen to raise taxes at the top end, rather than to increase borrowing. The latter would raise the very real risk of South Africa falling into a debt-trap, which would severely harm the prospects of our children and grandchildren.
Policy sovereignty
The minister's rectitude will enable South Africa to retain a degree of policy sovereignty. He knows that if the country falls deeper into debt, its ability to determine its own policy direction will be compromised. Such a loss of policy sovereignty would limit the scope for interventions aimed at fundamentally improving the structure of the economy.
Gordhan has sent a clear message that government’s programme of radical economic transformation must be based on sound economic and constitutional principles. He understands that policies not based on sound economic and constitutional principles will be doomed to failure.
By Kenneth Creamer.
Full story at Biz Community.
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