Momentum Wealth Budget Commentary

This was perhaps the most difficult budget speech post 1994, considering the budget deficit and prevailing economic environment.

Whilst there were varying views on what could be expected, the Minister heeded the call to assist individual tax payers by providing tax relief for lower and middle income earners. The Minister has provided significant tax relief to individuals amounting to R6,5bn, which goes some way to compensate for the effects of inflation. This relief was bolstered by an increase in the interest rate exemption and increase in medical caps. Despite this relief the Minister has however indicated that there may be the possibility of raising taxes in the future to fund public spending commitments.

Individuals are accordingly cautioned to utilize the relief appropriately and not to increase their debt levels.

As has become tradition, excise duties and fuel levies have increased. In addition a new carbon emissions tax will become effective from 1 September 2010 for new passenger vehicles which will assist in broadening the tax base.

After all the speculation relating to the SARB mandate and inflation targeting, the Minister reiterated the role of SARB as provided for in the constitution and confirmed that the bank will continue to target inflation within the 3 – 6 % range. This decision may however not be welcomed in certain sectors.

While the Minister in his inaugural budget speech may not have been able to meet all expectations, which are difficult to meet in the best of circumstances, he has done well in presenting a balanced budget.