The National Treasury announced on Wednesday that the gross tax revenue for 2020\/21 is expected to be R213.2 billion lower than projections in the 2020 Budget.<\/p>\n
\u201cHowever, due to a recovery in consumption and wages in recent months, and mining sector tax receipts, 2020\/21 revenue collections are expected to be R99.6 billion higher than estimated in the 2020 MTBPS.<\/p>\n
\u201cAs a result, government will not introduce measures to increase tax revenue in this Budget, and previously announced increases amounting to R40 billion over the next four years will be withdrawn.\u201d<\/p>\n
The main tax proposals include an above-inflation increase in personal income tax brackets and rebates, and an 8% increase in alcohol and tobacco excise duties.<\/p>\n
The National Treasury said while a temporary increase in spending was necessary to combat the spread and impact of Covid-19, the medium-term policy stance is focused on repairing the public finances.<\/p>\n
\u201cThe 2020 MTBPS noted that, over the past decade, increased government spending has failed to promote growth.<\/p>\n
\u201cSince 2008, real spending growth has averaged 4.1% annually, well above annual real GDP growth of 1.5%.\u201d<\/p>\n
Despite high levels of expenditure, supported by increased debt accumulation, growth has not recovered to pre-2008 levels.<\/p>\n
\u201cThe fiscal position, which was already weak before the current crisis, has deteriorated sharply, requiring urgent steps to avoid a debt spiral.<\/p>\n
\u201cFor several years, increasing debt-service costs have exceeded nominal GDP growth \u2013 a trend expected to continue over the medium term.\u201d<\/p>\n
The National Treasury said if this course is not reversed, the economy will not be able to generate sufficient revenue for the state to service debt.<\/p>\n
\u201cWere that to occur, government would lose the ability to control debt and debt-service costs, as investors conclude that lending rates do not adequately compensate them for risk, leading to greater currency volatility and a protracted capital flow reversal.\u201d<\/p>\n
According to the National Treasury, gross loan debt is expected to increase from R3.95 trillion, or 80.3% of GDP, in 2020\/21 to R5.23 trillion, or 87.3% of GDP, by 2023\/24.<\/p>\n
\u201cDebt-service costs will rise from R232.9 billion in 2020\/21 to R338.6 billion in 2023\/24.<\/p>\n
\u201cThese costs, which were already the fastest-rising item of spending, now consume 19.2% of tax revenue. Funds that could be spent on economic and social priorities are being redirected to pay local and overseas bondholders.<\/p>\n
\u201cOver the next three years, annual debt-service payments exceed government spending on most functions, including health, economic services, and peace and security.\u201d<\/p>\n