Tax incentives to stimulate economic growth in South Africa

Abstract

The current ongoing economic downturn commenced in December 2007 and was largely caused by the collapse of the housing and banking markets in the United States of America and Europe. Governments and central banks of various countries responded to the economic crisis by introducing inter alia the reduction of interest rates to unprecedented levels. However, credit conditions remain tight whilst consumer demand and employment in many countries are still deteriorating. Therefore, the International Monetary Fund called for fiscal stimulus in as many countries as possible in an effort to stimulate economic growth. During April 2009 the Servcorp International Business Confidence Survey was conducted to identify the top 10 countries perceived to be surviving the current economic crisis the best. This lead to the core research question: did these countries implement fiscal stimulus packages in an effort to stimulate economic growth and should South Africa consider implementing similar tax incentives? The main objective of the research study was to critically analyse the fiscal stimulus packages implemented by the top three countries and to identify possible tax incentives that could be implemented by South Africa in an effort to stimulate economic growth. It was found that the top three countries implemented tax incentives that mainly focused on the retail, export, housing and vehicle sectors of the economy. The main conclusions of the research study were that the tax incentives introduced by the top three countries were effective to support economic growth. It was therefore recommended that South Africa consider similar tax incentives. AFRIKAANS : Die huidige ekonomiese afswaai het in Desember 2007 begin en was hoofsaaklik veroorsaak deur die ineenstorting van die eiendoms- en bank sektore in die Verenigde State van Amerika en Europa. Verskeie lande se regerings en sentrale banke het op die ekonomiese krisis gereageer deur onder andere rentekoerse te verlaag tot buitengewone lae vlakke. Kredietverlening is steeds knap terwyl verbruikersaanvraag en werksgeleenthede in baie lande steed agteruit gaan. Daarom het die Internasionale Monetêre Fonds ‘n oproep gedoen dat soveel lande as moontlik fiskale aansporingspakette sal implementeer in ‘n poging om ekonomiese groei aan te wakker. Gedurende April 2009 het Servcorp ‘n internasionale besigheidsvertroue peiling onderneem om die top 10 lande te identifiseer wat die huidige ekonomiese krisis die beste deurstaan. Dit het gelei tot die kernvraag: het hierdie lande fiskale aansporingspakket geimplementeer om sodoende ekonomiese groei aan te wakker en moet Suid-Afrika oorweeg om soortgelyke aansporingspakkette te implementeer? Die hoof doel van die navorsingstudie was om die aansporingspakkette wat die top drie lande geimplenteer het krities te analiseer en moontlike belastingaansporings te identifiseer wat Suid-Afrika kan implementer om ekonomiese groei aan te wakker. Die top drie lande se belastingaansporings het gefokus op die kleinhandel-, uitvoer-, eiendoms- en motorsektore. Die navorsingstudie se hoof/oorwegende gevolgtrekkings was dat belastingaansporings soos ingestel deur bogeneomde top drie lande wel effektief was om ekonomiese groei te stimuleer en gevolglik die voorgestel gemaak dat Suid-Afrika soortgelyke belastingaansporings moet oorweeg. Copyright