Government to raise R43 billion through additional tax measures over the next two years

The South African government plans to raise an additional R43 billion through tax measures over the next two years – with plans to raise R28 billion in 2017.

According to Treasury’s 2016 mid-term budget document, proposed tax measures amount to R13 billion in 2017/18. Combined with higher taxes signalled in the 2016 Budget, total revenue increases amount to R43 billion over the next two years.

This will be in a bid to counter-act shortfalls in tax collection in 2016 (and expected in 2017), which were exacerbated by declining economic growth, and generally tough economic conditions for South Africans.

In tabling his budget on Wednesday, finance minister Pravin Gordhan also said that government would have to work harder at cutting its spending.

In 2012, government introduced expenditure ceilings. The 2015 and 2016 budgets set out a combination of spending reductions and tax increases.

“The ceilings have been effective: spending has remained stable as a share of GDP. At the same time, tax revenue has grown as a percentage of GDP, reflecting both policy measures and high tax buoyancy,” Treasury said.

“Nevertheless, low economic growth rates have led to revenue shortfalls, delaying the consolidation.”

The shortfall will be covered by:

  • Reductions to the expenditure ceiling of R10 billion in 2017/18 and R16 billion in 2018/19.
  • Tax measures to raise an additional R13 billion in 2017/18. Combined with the proposals announced in the 2016 Budget, this brings the total increase next year to R28 billion. Government will also propose measures to raise additional revenue of R15 billion in 2018/19.

One of the key cost-cutting measures to be implemented, will be to reduce government staff, the department said.

“Medium-term projections show that to stay within budgets over the next three years, all national departments will have to moderate headcounts,” it said.

“This will be achieved through attrition, as staff who retire or leave employment will not be replaced.”

South Africa is set to see big tax moves in the country in 2017, which will be detailed and implemented following the tabling of the 2017 budget in February. Among the expected tax moves are a sugar tax as well as a carbon tax, which are still being debated.

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Government to raise R43 billion through additional tax measures over the next two years