There are strong indications that South Africa may be compelled to revise its tax targets upwards as experts foresee the country’s budget shortfall accentuating for a second consecutive year.
According to the median estimate of 13 economists in a Bloomberg Survey , South Africa’s budget deficit is projected to reach 11% of gross domestic product in the fiscal year through March 2022, as against government’s estimate of 10.1% published in October’s medium-term budget policy statement.
The Survey findings indicated that increased spending and restrictions aimed at limiting the spread of the COVID-19 pandemic that hampered output and tax revenue may push the gap to 15.9% of GDP in the current financial year,
Before now, the country’s biggest shortfall was 11.6% of GDP recorded in 1914, followed by 10.4% in 1940.
Commenting on the fiscal trend, chief economist at Economists.co.za, Mike Schussler, was quoted as forecasting that “over the next three years South Africa will see very large budget deficits.
“The shouts for funding will become screams as state-owned enterprises like” Eskom Holdings SOC Ltd., the South African Broadcasting Corp., Denel SOC Ltd. and others will need money from the fiscus.
It would be recalled that as the challenges of fiscal deficit continued to escalate and with no extra funds available for government departments for the next three years, the Treasury had last year hinted of its plans to raise an additional 40 billion rand ($2.7 billion) in revenue, comprising 5 billion rand in 2021-22, 10 billion rand in 2022-23 and in 2023-24 and 15 billion rand in 2024-25.
Analysts believe that revenue drive may have to be increased with spending needs becoming more pressing as the government is considering raising taxes income to fund the rollout of COVID-19 vaccines. It also discussed the possibility of a wealth tax last year.
According to a study carried out by some groups, including the World Inequality Lab, it is estimated that such a levy on the high net worth South Africans could raise as much as 160 billion rand yearly.
Currently, South Africa’s top income-tax rate is 45 percent and its ratio of tax revenue to GDP is at 26 percent, compared to a global average of 15 percent.