{"id":812086,"date":"2025-02-17T08:00:00","date_gmt":"2025-02-17T06:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=812086"},"modified":"2025-02-17T07:55:14","modified_gmt":"2025-02-17T05:55:14","slug":"finance-minister-enoch-godongwana-wants-r300-billion-more-from-south-african-taxpayers","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/812086\/finance-minister-enoch-godongwana-wants-r300-billion-more-from-south-african-taxpayers\/","title":{"rendered":"Finance Minister Enoch Godongwana wants R300 billion more from South African taxpayers"},"content":{"rendered":"\n

Finance Minister Enoch Godongwana is expected to squeeze billions more out of South African taxpayers to fund the government\u2019s large budget shortfall.<\/p>\n\n\n\n

Godongwana will deliver his 2025 Budget Speech in the National Assembly on Wednesday, 19 February, at the Nieuwmeester parking site within the parliamentary precinct.<\/p>\n\n\n\n

The finance minister uses his Budget Speech to indicate the allocation of financial resources to the national government\u2019s priorities.<\/p>\n\n\n\n

Godongwana will outline all the financial, economic, and social commitments the government will prioritise in its planned expenditure.<\/p>\n\n\n\n

He faces numerous challenges, including a turbulent economic landscape, currency volatility, global trade tensions, and a big budget deficit.<\/p>\n\n\n\n

Investec Chief Economist Annabel Bishop expects to see similar fiscal ratio projections to the 2024 Medium Term Budget Policy Statement (MTBPS).<\/p>\n\n\n\n

\u201cGross loan debt was revised up for the current fiscal year and over the projection period, with the same case for the budget deficit,\u201d she said.<\/p>\n\n\n\n

She said fiscal slippage has become a general trend in South Africa, and in most cases, the fiscal metrics deteriorate.<\/p>\n\n\n\n

South Africa\u2019s latest debt to gross domestic product (GDP) was projected to peak at 75.5% in 2025\/26.<\/p>\n\n\n\n

This is well above the debt-to-GDP ratio of 60%, seen as the maximum sustainable debt ratio for an emerging market economy.<\/p>\n\n\n\n

Bishop warned that there is a risk of widening the debt ratios. The revenue to date is similar to last year. Both years see a budget deficit of R258 billion to date,\u201d she said.<\/p>\n\n\n\n

She explained that lower nominal GDP would increase the gross loan debt and deficit to GDP projections. <\/p>\n\n\n\n

Bishop added that South Africa\u2019s budget deficit was revised weaker, to -5.0% of GDP for this year from -4.5% of GDP.<\/p>\n\n\n\n

\u201cThe state’s ongoing heavy expenditures in the face of insufficient revenue create an ongoing fiscal deficit, and so borrowings have not peaked,\u201d she said.<\/p>\n\n\n\n

\u201cMarkets are wary, as state spending pressures continue to press on finances. With weaker economic growth and lower inflation than forecast, fiscal slippage is expected,\u201d she said.<\/p>\n\n\n\n

Finance Minister Enoch Godongwana squeezing taxpayers<\/strong><\/h2>\n\n\n\n
\"\"<\/a>
Citadel Chief Economist Maarten Ackerman<\/figcaption><\/figure>\n\n\n\n

The significant budget deficit and South Africa\u2019s rapidly rising debt-to-GDP put pressure on the Finance Minister to find additional money.<\/p>\n\n\n\n

Most economists agree that cutting state spending is the real solution to the problem. However, it is politically unpalatable.<\/p>\n\n\n\n

The Sunday Times reported<\/a> that the government plans to \u201csqueeze more out of taxpayers to fund a projected R300 billion shortfall\u201d.<\/p>\n\n\n\n

It said they discussed possible tax increases to cover the revenue shortfall. It can impact numerous taxes, including VAT, personal income tax, and corporate taxes.<\/p>\n\n\n\n

However, this poses challenges. South Africans are already overtaxed, and increasing taxes further could cause tax revenues to fall.<\/p>\n\n\n\n

Economist Dawie Roodt previously warned that there is no room to increase taxes as rich people and companies will leave the country if it happens.<\/p>\n\n\n\n

Another problem is that higher taxes result in lower compliance, which also causes tax revenue to decline.<\/p>\n\n\n\n

One option is to leave personal income tax brackets unchanged, which cause taxpayers to pay more due to bracket creep.<\/p>\n\n\n\n

Bracket creep is where inflation and salary increases pushes some taxpayers into higher tax brackets, making them pay more tax.<\/p>\n\n\n\n

Another option is for the government to increase value-added tax (VAT). However, it is politically sensitive as it affects poorer South Africans.<\/p>\n\n\n\n

\u201cIt took considerable pressure to raise VAT to 15% in 2018, and even the current fiscal pressures are unlikely to motivate another VAT raise,\u201d Ania Strydom from PaySpace said.<\/p>\n\n\n\n

There is also speculation about targeting medical aid tax credits to fund the NHI. In the 2025 Budget, we might see initial steps in this direction,\u201d Strydom said.<\/p>\n\n\n\n

Another option is a wealth tax. However, this carries enormous risks as rich individuals are mobile and can easily migrate their wealth.<\/p>\n\n\n\n

Citadel chief economist Maarten Ackerman said that significant tax hikes are unlikely given South Africa\u2019s already high tax burden.<\/p>\n\n\n\n

However, the government may explore alternative revenue measures, such as adjusting VAT structures or revising tax policies affecting high-net-worth individuals.<\/p>\n\n\n\n

Ackerman highlights that this might include changes around Regulation 28, capital gains tax, and dividend tax.<\/p>\n\n\n\n

VAT change debate<\/strong><\/h2>\n\n\n\n
\"\"<\/a>
President Cyril Ramaphosa<\/figcaption><\/figure>\n\n\n\n

Experts and politicians remain divided on the possible VAT change ahead of the Budget Speech later this week.<\/p>\n\n\n\n

Many expect an expansion for the zero-rated item list, promised by President Cyril Ramaphosa and others in 2024.<\/p>\n\n\n\n

Zero-rated goods are products exempt from VAT. They currently include 19 basic food items, farming inputs, and residential rental accommodation.<\/p>\n\n\n\n

The food products currently exempt from VAT include brown bread, maize meal, samp, mealie rice, dried mealies, dried beans, lentils, and pilchards in tins.<\/p>\n\n\n\n

It also includes milk powder, dairy powder blend, rice, vegetables, fruit, vegetable oil, milk, cultured milk, brown wheaten meal, eggs, and edible legumes.<\/p>\n\n\n\n

At a media roundtable, Deloitte experts said zero-rating can offer long-term relief for distressed South African households.<\/p>\n\n\n\n

They added that it was unlikely that VAT would be increased in the 2025 Budget as an increase would disproportionately affect the poorest in South Africa.<\/p>\n\n\n\n

They added that once items are added to the zero-rated list, it is doubtful that they will be removed in the future.<\/p>\n\n\n\n

However, there are still question marks over what items would be added to the zero-rated list, as it is a complicated process.<\/p>\n\n\n\n

Deputy Minister of Finance David Masondo previously said that a serious change in the zero-rated list is unlikely.<\/p>\n\n\n\n

Masondo said that existing items on the list are well-targeted. He added that increasing the zero-rating list will lead to VAT revenue loss.<\/p>\n\n\n\n

Not only will this add further strain to an already troubled budget, but it could also be directed to the already existing pro-poor government programmes.<\/p>\n","protected":false},"excerpt":{"rendered":"

Finance Minister Enoch Godongwana is expected to squeeze billions more out of South African taxpayers to fund the government\u2019s large budget shortfall.<\/p>\n","protected":false},"author":10,"featured_media":812091,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13716],"tags":[21747,11282,17448,20648],"class_list":["post-812086","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-2025-budget-speech","tag-citadel","tag-enoch-godongwana","tag-maarten-ackerman"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/812086","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\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=812086"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/812086\/revisions"}],"predecessor-version":[{"id":812101,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/812086\/revisions\/812101"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812091"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=812086"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=812086"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=812086"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}