{"id":716084,"date":"2023-09-05T10:43:21","date_gmt":"2023-09-05T08:43:21","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=716084"},"modified":"2023-09-05T10:57:27","modified_gmt":"2023-09-05T08:57:27","slug":"godongwana-warns-of-more-tax-pain-for-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/trending\/716084\/godongwana-warns-of-more-tax-pain-for-south-africa\/","title":{"rendered":"Godongwana warns of more tax pain for South Africa"},"content":{"rendered":"\n<p>Finance Minister Enoch Godongwana has hinted at possible tax increases to fund the government\u2019s growing expense bill. <\/p>\n\n\n\n<p>Speaking at&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.youtube.com\/watch?v=Xg1GvAACryw\" target=\"_blank\">News24\u2019s 2023 On The Record Summit<\/a>, Godongwana said South Africa\u2019s economic growth and tax revenue had been stifled by the energy and rail crisis, which has reached record levels of load shedding and logistics backlogs.<\/p>\n\n\n\n<p>Various big business stakeholders, such as food producers, retailers, and manufacturers, have noted the collective billions of rands they&#8217;ve had to spend to escape crippling power cuts \u2013 undercutting any revenue gains and, therefore, potential tax contributions.<\/p>\n\n\n\n<p>A study by the GAIN Group said inefficiencies at Transnet are costing the economy R1 billion a day, meaning the economic growth of 0.5% expected for 2023 could have been ten times higher at 5.4%.<\/p>\n\n\n\n<p>With commodity prices sliding and growth weakening on load shedding and logistics constraints, the latest monthly figures from the Treasury show corporate tax receipts have declined by more than 20% since a year ago, while the unbudgeted public sector wage settlement has driven up spending.<\/p>\n\n\n\n<p>Therefore, the government\u2019s revenue for this financial year is projected to be significantly lower than initial estimates. &nbsp;<\/p>\n\n\n\n<p>The National Treasury revealed that the budget moved to a deficit of R143.8 billion for July, the largest since 2004 and wider than the R115.5 billion forecast by economists.<\/p>\n\n\n\n<p>If the current pace of underperformance in tax collections is sustained throughout the year, gross tax revenue will be R82 billion lower than the February projection.<\/p>\n\n\n\n<p>Godongwana said there are three ways to address the revenue shortfall and fiscal deficit.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Increase taxes<\/strong>, which is challenging and unpopular.<\/li>\n\n\n\n<li><strong>Borrow more money<\/strong>, which is limited, and <\/li>\n\n\n\n<li><strong>Budget cuts<\/strong>, which also have limitations before hurting the system.<\/li>\n<\/ul>\n\n\n\n<p>\u201c<strong>I suspect you may need a combination of these instruments moving forward.<\/strong> You will probably get that on 25 October during the medium-term budget policy statement,\u201d he said.<\/p>\n\n\n\n<p>The Finance Minister said the task of balancing the budget is made more difficult because of the general elections next year.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-businesstech wp-block-embed-businesstech\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"IQVex8AJXr\"><a href=\"https:\/\/businesstech.co.za\/news\/finance\/715982\/there-is-a-plan-to-save-south-africas-finances-but-it-doesnt-play-well-with-politics\/\">There is a plan to save South Africa&#8217;s finances &#8211; but it doesn&#8217;t play well with politics<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;There is a plan to save South Africa&#8217;s finances &#8211; but it doesn&#8217;t play well with politics&#8221; &#8212; BusinessTech\" src=\"https:\/\/businesstech.co.za\/news\/finance\/715982\/there-is-a-plan-to-save-south-africas-finances-but-it-doesnt-play-well-with-politics\/embed\/#?secret=F7Nh3IGF3I#?secret=IQVex8AJXr\" data-secret=\"IQVex8AJXr\" width=\"500\" height=\"282\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>\u201cDuring an election, nobody wants to increase taxes, but everybody wants to increase expenditure to buy votes. You can\u2019t have both,\u201d he said.<\/p>\n\n\n\n<p>\u201cI said in February that if some of the things we are funding now become a permanent fixture, we must find a revenue source for them.\u201d<\/p>\n\n\n\n<p>He referred to things like the R350 social Relief of Distress grant (SRD Grant), which was introduced during the Covid-19 pandemic.<\/p>\n\n\n\n<p>Over the weekend, President Cyril Ramaphosa said the R350 grant laid the foundation for introducing a basic income grant.<\/p>\n\n\n\n<p>He said the successful implementation of the R350 grant has shown that the government can roll out a basic income grant of a similar nature.<\/p>\n\n\n\n<p>Godongwana cautioned against thinking that things that were easily funded during a commodity boom and revenue overruns can continue.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>The tax base is already overstretched <\/strong><\/p>\n\n\n\n<p>While Godongwana noted that they would review revenue avenues &#8211; including possible tax changes &#8211; Efficient Group chief economist Dawie Roodt believes there is no more wiggle room for such increases.<\/p>\n\n\n\n<p>According to Efficient Group\u2019s data, the three most significant contributors to government&#8217;s tax revenue are personal income tax (PIT), value-added tax (VAT), and Corporate Income Tax (CIT).<\/p>\n\n\n\n<p>Of the R1.95 trillion, PIT contributes R640 billion (33%), VAT accounts for R471 billion (24%), and CIT provides R336 billion (17%).<\/p>\n\n\n\n<p>However, only 1.12% of taxpayers (roughly 163,702 South Africans) pay 30% of total personal income taxes in the country, while 19% pay a whopping 87% of total personal income taxes.<\/p>\n\n\n\n<p>Additionally, a staggering 0.09% of corporate taxpayers (only 770 companies) pay 62.5% of total CIT, with 4.4% paying 95% of total corporate income taxes.<\/p>\n\n\n\n<p>\u201cThis means the country has an alarmingly narrow tax base, which is a massive concern for the state\u2019s finances. You cannot increase this.<\/p>\n\n\n\n<p>\u201cIf this increases, the tax base will collapse as many of the 1.12%, as well as businesses, will simply leave the country \u2013 which they are already doing,\u201d said Roodt.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-businesstech wp-block-embed-businesstech\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"FQdeUUzmbR\"><a href=\"https:\/\/businesstech.co.za\/news\/government\/712948\/south-africa-is-in-deep-trouble\/\">South Africa is in deep trouble<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;South Africa is in deep trouble&#8221; &#8212; BusinessTech\" src=\"https:\/\/businesstech.co.za\/news\/government\/712948\/south-africa-is-in-deep-trouble\/embed\/#?secret=y6wVmXJdJy#?secret=FQdeUUzmbR\" data-secret=\"FQdeUUzmbR\" width=\"500\" height=\"282\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Read: <a href=\"https:\/\/businesstech.co.za\/news\/government\/714902\/warning-for-joburg-motorists-jmpd-now-coming-after-your-rates-and-taxes\/\">Warning for Joburg motorists \u2013 JMPD now coming after your rates and taxes<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>South Africa has limited options available to help recover from a massive budget deficit &#8211; but higher taxes may be in the mix.<\/p>\n","protected":false},"author":92,"featured_media":660715,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[26],"class_list":["post-716084","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trending","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/716084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=716084"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/716084\/revisions"}],"predecessor-version":[{"id":716108,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/716084\/revisions\/716108"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/660715"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=716084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=716084"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=716084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}