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The GNU: How will the different parties navigate the differences in tax policy?

By: Kananelo Lethena

Since the dawn of democracy in 1994, the African National Congress (ANC) has largely driven the tax policy of this country with its absolute majority in parliament. However, with the party losing its absolute majority in the recent elections, resulting in the formation of the so-called Government of National Unity (GNU), it will be interesting to see whether there will be a shift in tax policy.

Usually, the Medium-Term Budget Policy Statement (MTBPS) is not used as a platform to introduce major tax policy reforms/legislation. Therefore, it is not expected that there will be significant tax policy announcements by the Minister of Finance in the upcoming MTBPS. However, the MTBPS can sometimes be a platform to give an indication of what is likely to be on the cards when the Minister of Finance delivers the main budget speech in the coming year. It is on this backdrop that there are questions whether the different parties have already started lobbying for certain tax policy positions to be considered in the next budget speech. If this is the case, it is unlikely that we will get an indication of this in the upcoming MTBPS.

However, this does beg the question of how the different parties will deal with the differences in tax policy in the coming months before the budget speech is delivered next year. It is commonly known that the two biggest parties in the GNU, the ANC and The Democratic Alliance (DA), do not always agree on tax policy matters. A good example of this is the so-called wealth tax. The ANC has for many years advocated for the introduction of a wealth tax. This has particularly been amplified of late given South Africa’s income and wealth inequality. In its 55th National Conference Economic Transformation document, the ANC resolved to explore the introduction of a wealth tax. On the other hand, the DA is known to oppose any form of wealth tax.

Such differences in tax policy are surely going to play out in the GNU in the coming months. With the first 100 days of the GNU having passed recently, it is encouraging to see that the GNU appears to have largely been working smoothly. We hope this will continue to be the case when matters of tax policy are discussed to eliminate any uncertainty. Tax policy uncertainty is known to be one of the factors that affect investor confidence. Therefore, whatever tax policy differences the parties in the GNU may have, we certainly hope these will be resolved amicably through negotiations. This can only be good for investor confidence, which South Africa desperately needs to grow the economy and create jobs.

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