CONSUMERS TAXATION TO SLOW GROWTH - ECONOMISTS

MBABANE – The heavy taxation of consumers will lead to a fall in the retail sector. This will in turn lead an eroded economy in the short-term.

The minister of Finance, in his budget speech, said the country would introduce Value Added Tax (VAT) on electricity, increase fuel tax to 43 per cent and increase pay-as-you-earn for those earning E250 000 per annum to 36 per cent.

This is the view of an economist, who preferred to comment under anonymity. He said this would be because the heavy taxation on consumers would lessen the disposable income of taxpayers. He said in the short-term (next one to two years).

He explained that the disposable income was the money available to consumers for spending on durable and non-durable items. He said this would affect the way people spend on furniture, cars, bread and other things.

The economist said people would continue buying the necessities including food, which means they would spend less on durable items, including clothing and furniture.  “A typical consumer will not go and buy new shirts but hang on to whatever they currently own,” he said.

He further explained that this would not only affect the consumers’ on disposable income, but also trigger inflation increase, because the hike in fuel and electricity would also lead to products becoming more expensive.

He further said this could also lead to unemployment in the retail sector, as people would be spending less, and retailers would be generally strained and that could prompt them to retrench. “Some of the companies in the retail sector create temporary jobs, particularly for semi-skilled or non-skilled people,” he said.
He said these companies would have to cut some of these jobs to survive, putting more pressure on the economy. He said from a holistic stand point, the budget presented by the minister was very harsh on the consumer.

The economist said the deference of the capital projects would also affect the construction industry in that they would have fewer jobs from the government. He said, however, the country should move from depending on the government, but more on the private sector, which he said he believed the budget aimed to do in the long run.

He went on to say that the introduction of the VAT on the electricity would attract investors in the energy sector, who will in turn create jobs in the long-term. “The budget is devastating to the consumer, but will encourage people to invest, leading to more job opportunities in the long run,” he said.
Another economist said he did not see how the budget related to a turnaround to the country’s ailing economy, especially since it did not have expansionary policies. “People will not have money to spend. The budget is not aimed at boosting the economy, but at boosting government coffers,” he said.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: