The business of finance
2010-02-21 13:00
How
much sleep did you get this week?
I have
been able to sleep for five hours a night. I tend to work faster and harder
during the day. We have spent more time communicating with the public, which is
important. The economy can’t be just a concern of the economists. The economy is
about every household. More people need to understand where the taxes go and how
the government makes choices.
Is
there room for improvement in tax collection?
Tax
collection depends on the size of the population and how well the tax is
collected and, most importantly, the economy.
In
this financial year we are projecting to lose R69 billion (in tax revenue). We
hope there will be stability between now and the end of the financial year and
that next year will be what we think it will be.
Many
economists are worried about the W-shaped recession. We hope the recovery will
be smooth and faster than it is. If that is the case we will be fine.
How
real a threat are tax increases next year and can the tax net be
broadened?
We
would ideally like to broaden the tax base instead of increasing taxes. We would
like South Africans to cooperate and pay their fair share. We have too many
people we know are not properly declaring their income. Some people get tenders
from the government but do not pay their taxes.
Two
things are happening in the country and internationally. The walls of tax havens
are falling and the space to manoeuvre internationally is becoming
smaller.
The
other is voluntary disclosure. We are saying to South Africans: “Come clean and
be honest with us. You will still pay your taxes but the penalties will be
lower.”
But if
the economy does not perform as we expect it to then we will have to re-examine
our tax rates.
What
lesson can be learnt about state debt if you look at the experience in Greece,
and are you nervous about the rate increase in government debt?
I
sleep very peacefully. We’ve had a good record in recent years, where we paid
off debt and we didn’t borrow too much.That is partly because we were collecting
more taxes.
We
were able to manage our debt portfolio to 23% of GDP. When you’re at that point
you realise that we still have a lot of space to borrow.
The
40% forecast in state debt is modest compared to Greece, which is more than 100%
and the US and UK, where it stands at between 70% and 100%.
But we
have to be sure that we keep to the fiscal path that we have mapped out, with a
budget deficit of 7.3% this year, 6.2% next year and eventually 4.1%.
There
will be another crisis. We have learnt from this crisis that we need to reduce
our deficit as quickly as possible.
What
picture is emerging about corruption that you are able to see as a result of the
work you are doing as part of the Inter-Ministerial Task Team?
Corruption
is happening on a broad scale. But let us look at social grants, which are meant
for poor people, the aged and the disabled.
There
are thousands of people who are working, including civil servants, who are
accessing child support grants. That is wrong.
There
is lots of corruption in the production of identity documents and there are
people who are not paying tax.
Then
there is the procurement side. We have cases totalling R2 billion and have
identified 1 200 civil servants who are engaged in tender and tax fraud.
We are
now working on matching databases. We will be able to see who gets tenders, who
is on the tax and other government systems.
We are
reviewing the system as a whole to see if the state can’t procure in a different
way.
Based
on your experiences, do you find that civil servants are buying into the
anti-corruption message and how well are you communicating that message?
These
things take time and we need more public pressure.
People
need to be intolerant of people who get tenders and do not pay their taxes. The
process has begun. More people are talking about it.
In
time, people who are engaged in these practices will be regarded as misfits in
society.
Do
you think the kind of spending the government is pursuing is encouraging skills
development?
We
need to give Higher Education Minister Blade Nzimande time to redesign the
system. In the years that follow this will place us in a better position in
terms of skills. But we also need an initiative from the individual.
People
need to look for opportunities to improve their skills.
Thirdly,
the private sector needs to invest in upgrading the skills of its employees.
Without this the economy will not be able to compete globally.
The
recession has trained the spotlight on banking. Local institutions have come out
well. Is there room to improve regulation in this sector?
We
have indicated that we will be meeting the chief executives of the banks
shortly.
The
things we want to talk to them about include the Competition Commission report
in bank charges, how to improve regulation, how to respond to international
standards that are emerging, and tax compliance.
Ultimately
we will need to implement a lot of the international standards that apply to
South Africa.
Why
is it important that the Financial Services Charter is salvaged?
The
charter took dialogue with the private sector a significant way forward. It
reoriented banks to making an investment towards the social development of South
Africa.
The
spirit of the charter was right. We need to get consensus and that will benefit
the country.
Do
you personally respond to comments left on your Facebook page?
Most
of them are my own. In recent times I have been assisted by my team but I have
told them exactly what to say. Soon I’ll be getting back to answering them
myself.
- City Press