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South Africa Warns Of Much Higher Fiscal Deficit

by Lorys Charalambous, Tax-News.com, Cyprus

16 September 2009


South Africa’s Finance Minister, Pravin Gordhan, has said that the country’s fiscal deficit will be much wider in 2009/10 because of reduced tax collections.

He said that tax revenue can be expected to be some ZAR60bn (USD8bn) less than forecast, with falls in company tax and VAT collections, due to the economic recession and muted consumer expenditure.

Gordhan had previously disclosed that, after holding up reasonably well in the last year, revenue collection had deteriorated in the first three months of this fiscal year, and that the budget deficit would be higher than estimated at the time of the budget in February. It is now expected that the then-forecasted deficit of 3.9% of GDP in 2009/10, itself a large increase from the 1.2% of GDP experienced in 2008/09, will now be much higher.

Some predictions have put the increased deficit for this financial year at up to 7% of GDP, as the government has continued to spend in order to counteract the recession. The Treasury should release its re-worked fiscal and economic predictions within the government’s interim budget towards the end of October.


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