Tax increases cited among measures that could fund a Basic Income Grant

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The Expert Panel on Basic Income Support says tax increases, among other measures, could help fund a proposed Basic Income Grant in South Africa.

This is according to a statement issued on Tuesday (14 December) by the Department of Social Development, which established the panel along with the International Labour Organisation (ILO) and UN Sustainable Development Goals Fund.

How South Africa’s Basic Income Grant could be funded

The panel’s report, which was launched on Monday, recommends that the R350 social relief of distress (SRD) grant be institutionalised and form the platform for a gradually implemented Basic Income Grant.

The panel also makes recommendations on how such a grant could be funded and how the financing options would affect South Africa’s economy.

“Taking these factors into account, the panel of experts are of the view that an entry-level version of the BIS [Basic Income Support] can be safely implemented using a mix of financing approaches, including limited debt financing, tax revenue improvements arising from any demand stimulus and carefully calibrated tax increases where required,” the Department said in its statement.

The Department welcomed the panel’s report and said it will “consider it for further internal discussions and social dialogue with key stakeholders.”

Members of the panel included Prof Alex van den Heever (Chair), Prof Margaret Chitiga-Mabugu, Prof Stephen Devereux, Prof Murray Leibbrandt, Prof Michael Sachs, Prof Jan van Heerden and Prof Gemma Wright.

Uncertainty over fate of SRD grant

Although the panel recommends using the SRD grant as a platform for BIS, there is uncertainty over whether it will be extended beyond March 2022 or not.

Finance Minister Enoch Godongwana did not make a firm commitment or announce a budgetary allocation for an extension in his recent Medium Term Budget Policy Statement.

In a press conference after presenting the Statement in Parliament, Godongwana said the decision on whether to extend the grant or not lies with the government, not Treasury.

“Given the weakened public finances, new spending commitments can only be funded by closing existing programmes to free up revenue or through permanent increases in revenue collection,” he said.

“New tax proposals must also be assessed against their revenue-raising potential and wider effects on the economic activity and growth.”

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