South Africa’s tax income could well be lower than forecast this year – with a downturn in the economy exacerbating problems at the tax revenue service.
This is according to finance minister Nhlanhla Nene, who was speaking at a tax conference on Monday (10 September), reports Reuters.
He added that tax avoidance and evasion would rise in any economy that was growing slowly and where taxes have been increased, and the recession would only make matters worse.
“There is now additional downside risk to the tax revenue projected at the beginning of the year because of the contraction in the economy,” Nene said
“Fixing our economy to ensure that it grows faster and in a more sustainable manner is therefore critical”.
Poor GDP figures released on Tuesday (4 September) revealed that South Africa has entered a technical recession following two consecutive quarters of negative economic growth, heightening the country’s risk of suffering yet another credit downgrade in the second half of the year.
Numbers show that the economy shrank by 0.7% in the second quarter of this year (quarter-on-quarter annualised), while the first quarter’s figures were revised down even further to -2.6% from -2.2%. This brings the total year-on-year growth to an anaemic 0.4%, well below the population growth rate of 1.7%.
The rand immediately plunged from R14.90/$ to R15.20/$ in the wake of the data release, while the 10-year bond yield rose nearly 15 basis points, trading above 9%.