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BUDGETING FOR JOBS - THE DA's ALTERNATIVE BUDGET 2005
Executive summary
The Democratic Alliance's Alternative Budget for 2005/06 is all about jobs. In glaring contrast to the government's weak answers to the question of chronic unemployment, the DA's Alternative Budget represents a comprehensive, costed policy platform personified by lower taxes, increased efficiency of governance, fiscal prudence and incentives for job creation, skills development and investment.
South Africa has one of the world's highest rates of unemployment - stagnant at over 35 percent for the last seven years. Government seems void of ideas to combat the crisis. But the DA believes that bold action on three fronts - namely employment incentives, investment and enhanced skills development - will create the right conditions for large-scale job creation.
Specifically, the DA proposes -
To provide more employment opportunities:
1. For at least five years, business should be entitled to deduct 150% of the first R2000 per month of new employees' salaries for tax purposes. This intervention alone would finance the creation of half a million jobs in the first year; and
2. Individual households should be entitled to deduct up to R2000 per month from their taxable income for permanent regular employment provided by them;
To generate more fixed investment:
3. Interest earned should be tax-free up to the greater of R12 000 or 10% of taxable income per year;
4. Taxation on retirement funds should be phased out over three years, and a holistic review of the taxation of retirement savings should be urgently undertaken;
5. Capital Gains Tax should be abolished;
6. Estate Duties should be abolished; and
7. Donations Tax should be abolished;
And to enhance skills development:
8. A spend of R12,6bn over five years to eliminate the backlog in schools' facilities and resources;
9. The establishment of a national network of community-based early childhood education centres;
10. A nation-wide bursary voucher programme aimed at giving the most academically promising 350 000 children from low-income families the opportunity to receive a better school education;
11. Opportunity Vouchers to assist young people to obtain work experience and training, start small businesses, or further their studies by reducing the costs of any one of these options;
12. A tax rebate equivalent to one-third of tertiary institution tuition fees is given to students or their parents for a maximum of four years of successful study; and
13. Allowing employers to be reimbursed in full for money spent on approved training, including schemes administered by employer associations.
Our budget also provides for improved security and policing to reduce crime - a leading constraint on investment. It also provides for the implementation of the DA's HIV/Aids policy, which defines prevention, treatment and Aids orphans as the three main focus areas.
Once again, we have budgeted for the rollout of a Basic Income Grant (BIG) of R110 per month. In addition, any child under the age of eighteen who can produce death certificates for both parents should automatically be entitled to a child support grant, even if grants are not available to children of his or her age at that stage.
Among others, the following reforms should be taken to finance new initiatives:
1. Wasteful expenditure, whether fraudulent, or as a result of negligence or incompetence, is stamped out of all government departments;
2. The government's expenditure on consultants be reduced by at least 25% in 2005;
3. Ruthless action should be taken against people who have been defrauding the state with ghost civil servants, including the recovery of all money improperly obtained;
4. The Departments of Land Affairs, Environmental Affairs and Tourism, and Water Affairs and Forestry should be consolidated into one department;
5. The Government Communication and Information Service should be abolished and the responsibilities of the Departments of Public Works and Public Service and Administration should be allocated to other departments;
6. The Department of Sports and Recreation should be abolished and the facilities budget allocated to other departments;
7. Non-violent awaiting-trial prisoners should be released with electronic tagging devices;
8. The SETA system should be scrapped in favour of a voucher and tax-rebate system as outlined in the skills section above;
9. The Umsobomvu fund should immediately be dissolved; and the funds reallocated to more needful causes;
10. One fifth of the full time SANDF should be replaced with reservists
All-in-all, our budget includes R2,3 billion worth of tax cuts to encourage job creation, R2,75 billion worth of tax cuts to encourage foreign and domestic investment, and over R5,5 billion of additional expenditure to reform the education and training system.
While the tax cuts do reduce government revenue, there are benefits. In particular, the increased investment by new firms, together with greater expenditure on consumption, can actually result in increased revenue (as happened in Ireland ).
For the sake of prudence, we have left the positive effects of spillovers and multipliers out of our costing, although their benefits could potentially be significant.
download Budgeting for Jobs - The DA's Alternative Budget 2005(.pdf file)
download Budgeting for Jobs - The DA's Alternative Budget 2005(.doc file)
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