News update: Tax targets may be driven up by SA’s widening budget gap

 News update: Tax targets may be driven up by SA’s widening budget gap

News update.

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A revision of the tax increase targets may become a necessity as South Africa’s budget shortfall is set to breach wartime levels for a second consecutive year. The budget deficit is set to reach 11% of gross domestic product (GDP) in the fiscal year through March 2022, in comparison to the government’s estimate of around 10.1%, as published in the October medium-term budget policy statement.

The gap is expected to widen to 15.9% of GDP in the current fiscal year as a result of increased and continuous spending and restrictions aimed at curbing the spread of Covid- 19. The latter heavily weighed on output as well as tax revenue, showed a survey which was conducted from January 15 to January 21.

The largest shortfall recorded was during 1914, with 11.6% in GDP, followed by 10.4% in 1940.

According to Mike Schussler, chief economist at, South Africa will see substantial budget deficits over the next three years. State-owned enterprises, such as Eskom and numerous others, will need money from the fiscus. There is no additional funds available for government departments for the next three years and the Treasury has said in 2020 that it intends to raise an additional R40 billion in revenue. This consists of R5 billion in 2021 to 2022, R10 billion in 2022 to 2023 as well as 2023 to 2024, and R15 billion in 2024 to 2025.

These figures may have to be increased should spending needs become more pressing. The possibility of wealth tax was discussed by the Treasury last year, which could raise as much as R160 billion annually. The top income-tax rate is 45% with a ratio of tax revenue to GDP at 26% when compared to a global average of 15%.

Chris Louw

Featured Financial Writer for SA Shares - Read more about Chris's Bio -

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