South African revenue collections that are expected to overshoot budget estimates could take the pressure off the National Treasury to raise taxes to pay for the acquisition and rollout of coronavirus vaccines.<\/p>\n
Total tax revenue for the first nine months of the fiscal year is R875.7 billion ($58 billion), according to National Treasury data. While that\u2019s 10.6% lower than the same period in 2019-20, it compares with a 17.9% shortfall projected for the full year in October\u2019s medium-term budget policy statement.<\/p>\n
If the trend in tax collections continue for last three months of the fiscal year, the extra revenue could be as much as R106.5 billion, Johann Els, the chief economist at Old Mutual Investment Group, said in a note.<\/p>\n
\u201cShould even a portion of this windfall be realized, I see no need for government to raise taxes in this case, as has been suggested as a means to fund the vaccine rollout.\u201d<\/p>\n
It could cost as much as R24 billion to vaccinate 40 million people, or around two-thirds of South Africa\u2019s population, according to the National Treasury.<\/p>\n
The country\u2019s biggest companies are in talks with government to help finance and facilitate the rollout of vaccines and medical insurers are expected to pay to vaccinate their members and subsidize the cost for an equal number of non-members.<\/p>\n
In addition to raising taxes, the Treasury\u2019s options to fund vaccines include increasing borrowings, re-prioritizing existing budgets and using available cash in government\u2019s bank accounts. Finance Minister Tito Mboweni will announce details in the budget on Feb. 24, the Treasury said.<\/p>\n
What Bloomberg Economics Says:<\/strong><\/p>\n \u201cThe medium-term revenue assumptions remain optimistic, making them subject to considerable risk – especially if growth continues to disappoint,” said African economics, Boingotlo Gasealahwe.<\/p>\n \u201cThe National Treasury has built up cash balances over the last year of about R150 billion they can draw down on those cash balances so we don\u2019t need to issue more or tax more,\u201d said Jeffrey Schultz, a senior economist at BNP Paribas South Africa. \u201cWe\u2019ve got the funds, we just need to allocate it in the budget framework.\u201d<\/p>\n However, a windfall on 2020-21\u2019s revenue collection may not be enough eliminate the need for tax increases in coming years, with a budget deficit that\u2019s still projected to be more than 10% of gross domestic product in the 12 months that start April 1 and increasing demands on the state purse.<\/p>\n The Treasury said in June, long before the country started ordering vaccines, that it plans to raise an additional R40 billion in taxes in the medium term.<\/p>\n \u201cRevised estimates of the revenue collected for the 2020-21 year, as well as the implications for the pre-announced tax increases, will be announced in the budget review,\u201d the Treasury said in response to questions this week.<\/p>\n
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