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South Africa To Seek Additional Tax Revenue

by Lorys Charalambous,, Cyprus

27 October 2016

On October 26, during his parliamentary speech on the 2016 Medium Term Budget Policy Statement (MTBPS), South Africa's Minister of Finance, Pravin Gordhan, said the Government proposes to raise an additional ZAR43bn (USD3.1bn) through tax measures over the next two fiscal years.

The Minister pointed out that, in the current environment of reduced economic growth, ensuring a sustainable outlook for the public finances will require additional fiscal consolidation to contain the budget deficit and slow the rise in government debt.

"Our economic growth will be just 0.5 percent this year, rising to 1.7 percent in 2017; measured and balanced fiscal consolidation will continue over the period ahead, with the budget deficit declining from 3.4 percent this year to 2.5 percent in 2019/20; and debt is projected to stabilize at just less than 48 percent of gross domestic product," Gordhan disclosed.

The MTBPS report noted that, in the current 2016/17 fiscal year, there has been sharp decline in the rise in annual tax revenue. For the first half of the year, tax revenue grew by 7.4 percent against an initial projection of 10.1 percent, mostly due to shortfalls in personal income tax. Value added tax performance has also been sluggish, largely due to weak demand for domestic and imported goods. However, corporate income tax performed better than expected, largely because of higher tax from the mining sector.

Gordhan confirmed that, as a consequence, he is to propose tax measures in the 2017 Budget to raise an extra ZAR13bn in the 2017/18 fiscal year. Combined with the proposals announced in the 2016 Budget, this would bring the total increase in 2017/18 to ZAR28bn. Measures to raise additional revenue of ZAR15bn will also be proposed for 2018/19.

The Ministry of Finance also tabled the finalized 2016 tax legislation in the National Assembly, together with the MTBPS. Gordhan confirmed that "the bills give effect to the special voluntary disclosure program that commenced on October 1, 2016, and also extend the employment and learnership tax incentives. Given the demands on the legislative program, the carbon tax bill will be dealt with in 2017. Consultations on this and the proposed sugar tax are continuing."

TAGS: South Africa | compliance | tax | value added tax (VAT) | tax compliance | tax incentives | fiscal policy | law | gross domestic product (GDP) | budget | ministry of finance | legislation | carbon tax | revenue statistics | Africa

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