Gordhan the party pooper

Pravin Gordhan, the finance minister, has warned that what seems in the monthly revenue figures to be a tax windfall for the government is nothing of the sort.

Gordhan was speaking at a joint meeting of Parliament's finance committees yesterday, only two weeks before his medium-term budget policy statement on October 27.

And, with the standoff between the government and labour about public sector pay increases extended, Gordhan said it was time to talk "frankly and openly" about the trade-off between better pay for the employed and job opportunities for the out-of-work.

"It's a simple equation: if we continue to increase current benefits for current workers, we crowd out future employment. If we continue to have these imbalances and continue to have the wrong people employed in the wrong places, and with a lack of skills, then we are going to continue to shoot ourselves in the foot," he said.

He said the government and some provinces were taking on far too many administrators and not putting money into the front line of service delivery.

Without giving numbers, Gordhan told the finance committees that his mid-term statement would confirm a return to modest economic growth, but in a vulnerable global environment that could turn sour.

"The numbers will show that, yes, growth is returning, but employment is not returning so fast," he said.

The government's measures to bolster the economy had saved tens of thousands of jobs "but we haven't been able to meaningfully dent the large number of people who actually lost their jobs".

The government pumped millions of rands into ailing companies through the Industrial Development Corporation and sponsored a training scheme that used the lull in business activity as an opportunity to teach workers new skills.

Gordhan said the economic slowdown had led to what appeared to be an increase in revenue collection but in fact the higher figure was attributable to investors holding back, resulting in a reduction in VAT refund claims.

"On the revenue side, there are, as a result of the monthly figures that you see, indications this year that things are looking better," he said.

"The only thing I want to caution us about is that these better numbers don't necessarily indicate that suddenly there is a massive recovery or that the tax base has grown."

Gordhan said the windfall was mainly a result of technical factors, including the faster collection of provisional tax.

"In a sense, we are pulling money into this year that actually belongs to next year, so we want to make sure that not too many people get too excited. You have to help us to dampen the spirits a bit," he told the MPs.

Oupa Magashula , commissioner of the SA Revenue Service, said his team had issued 270000 penalty notices in the year to March and 60000 notices to recover outstanding taxes from payrolls.

SARS officials had increased the number of audits from 50 000 in 2008 to 160000 last year, bringing in an additional R1.3-billion.

"A credible threat of detection and enforcement for those who fail to meet their obligations is an essential ingredient for a fair and equitable tax system," Magashula said. "There is no place to hide."

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