Finance Minister, Enoch Godongwana
Image: Armand Hough / Independent Newspapers
National Treasury will have to find billions from somewhere else now that it can no longer increase value-added tax (VAT) to 15.5% this year, with an additional 0.5 percentage point addition next year.
Moreover, the department will have to now provide tax relief to millions South Africans who otherwise would have benefited from an inflation-related adjustment to the tax tables.
This leaves National Treasury with a minimum of R28 billion to find for the fiscus at a time when government debt is almost $80 billion – or almost R340bn. It has 30 days to cover this shortfall.
As a result, government will must be more efficient when it comes to collecting tax – with R800 billion outstanding to the fiscus according to Members of Parliament who voted yesterday on the fiscal framework that set the stage for the National Budget to pass on the condition that there was tax relief.
ActionSA’s Athol Trollip yesterday said that the South African Revenue Service (SARS), which collected an additional R8.8 billion in tax in the year that has just ended, would have to step up. “The solution lies with SARS doing its job and this house enabling SARS to do its job”.
In addition, the state will have to cut wasteful expenditure, which is evidenced in the many annual reports for state entities that are flagged as qualified by the Auditor-General.
In 2022, the Standing Committee on Appropriations heard that, over the past five years, fruitless and wasteful expenditure to the value of R1.5 billion had been incurred by 41 national departments, with just more than half of these being labelled as consistent delinquents.
ActionSA National Director of Operations and Parliamentary Operations, Matthew George, has called for tighter spending and municipalities no longer being able to purchase fleets of new BMWs on a regular basis.
Bobby Wessels, senior manager of Corporate & International Tax at AJM said it is possible that the over-collection of R8 billion in tax revenue in the most recent tax year has played a pivotal role in offsetting the need for additional tax increases, providing much-needed relief while maintaining fiscal stability. “Additionally, expenditure cuts may be targeted to balance the budget,” he said.
Government’s primary lever for fiscal adjustment will need to be a cut in spending, said Andrew Bahlmann, CEO of Deal Leaders International. “While often perceived negatively in the short-term, strategically cutting non-essential or inefficient spending can lead to a more streamlined and productive public sector,” he said.
Bahlmann said such increased efficiency can free up resources in the long run, potentially lowering the burden on taxpayers and fostering a more competitive economic environment, ultimately proving beneficial for sustained gross-domestic product (GDP) growth.
South Africa’s GDP gained 0.6% last year, with the government and business partnership seeking to reach 3% growth this year to create a million jobs.
