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South Africa Warns Of Future Tax Hikes

by Lorys Charalambous,, Cyprus

24 October 2014

Presenting the 2014 Medium Term Budget Policy Statement on October 22, South Africa's Minister of Finance, Nhlanhla Nene, warned that, with falling tax collections this year, additional revenue measures will be needed in the 2015 Budget.

While South Africa's economy had been expected to grow by 2.7 percent in 2014, the current forecast has been reduced to 1.4 percent, in part due to the weak global economic environment.

Tax revenue will therefore fall below budget in the 2014/15 fiscal year, to ZAR956bn (USD86.9bn) from the previous target of ZAR962.8bn. In response, Nene announced the Government will seek to reduce the budget deficit from 4.1 percent this year to 2.5 percent over the next three years.

Nene pointed out that "eight months ago, the 2014 Budget stated that additional measures to ensure fiscal sustainability would be required if the economic outlook were to worsen. That turning point has been reached."

He added that, "if we are to avoid reducing expenditure in real terms, about ZAR15bn a year in additional revenue will need to be raised. Details will be announced in the 2015 Budget. The revenue measures will be designed to limit as far as possible any negative impact on growth and job creation."

The Medium Term Budget Policy Statement adds: "Two years of fiscal consolidation will put the public finances on a sustainable footing. … Moderating expenditure growth, combined with tax measures to increase revenue, will improve the fiscal position by ZAR22bn in 2015/16 and ZAR30bn in 2016/17, … stabilizing national debt at 46 percent of GDP in 2017/18."

It later specifies that proposals will be introduced in the 2015 Budget to generate additional revenue worth at least ZAR27bn over the next two years (ZAR12bn in 2015/16 and ZAR15bn in 2016/17), which would be followed by measures worth a further ZAR17bn in 2017/18.

No details were given as to what measures might be announced, but the statement said they should "enhance the progressive character of the fiscal system, improve tax efficiency and realize a structural improvement in revenue."

TAGS: South Africa | Finance | tax | economics | fiscal policy | gross domestic product (GDP) | budget | revenue statistics | Africa | Tax

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