Budget Commentary from Momentum

Corporates and small businesses were in favour with the Minister this year. Numerous changes have been implemented. As was anticipated, headline corporate income tax has reduced from 29% to 28%. In conjunction with this, is the second phase of changes to STC to a 10 percent final withholding tax for domestic shareholders being implemented. Small business is going to benefit significantly from a simplified tax regime and an increase in the VAT threshold. A welcome relief to many Pension Funds and Long term Insurers is the increase in foreign exposure limits from 15% to 20%.

The minister has not forgotten individuals, adjusting the tax brackets with the focus once again being on the lower and middle income bracket. This relief will be welcomed by many who have felt the impact of the recent interest rate hikes – however, care should be taken not to use this relief to incur further debt.

Pensioners will be helped along with the increase in old-age grants and the proposed review of qualifying ages, although only effective in 2009, will go a long way to alleviate poverty of those who fell outside the qualifying criteria.

While there was a tremendous apprehension regarding what might come out of this year’s Budget Speech, the Minister has delivered a balanced and practical budget which is focussed on sustaining and stimulating economic growth.