Mid-term budget: Tax hikes on the horizon

The treasury said on Wednesday that tax hikes will be announced in the 2024 budget to raise an additional R15 billion in revenue.

The announcement came in the Medium-Term Budget Policy Statement in which Finance Minister Enoch Godongwana stressed the need to stabilise public finances and contain a widening deficit.

“The main budget deficit has increased by R54.7 billion compared with the 2023 budget estimates. This reflects lower revenue performance, higher wage bill costs and higher projected debt-service costs,” Godongwana said.

Revenue collection is expected to be R56.8 billion lower than forecast in the main budget in February.

The main reason for this, the minister said, was a sharp fall in corporate income tax, particularly from the mining sector, as the commodities boom waned.

“The result of the shortfall is a substantial worsening in the main budget deficit in the current fiscal year. We are now projecting a deficit of 4.9% of GDP compared to our previous estimate of 4%.”

But personal income tax collection was better than forecast, Godongwana said.

According to the treasury, tax revenues are expected to increase to R2.1 trillion or 25.1% of GDP, by 2026-27.

“Revenue collection, however, is projected to fall short of 2023 budget estimates by R121.4 billion between 2024-25 and 2025-26, with tax buoyancies generally lower over the medium term.”

It added that the current sharp contraction in commodity prices “suggests that the windfall tax receipts that South Africa enjoyed in recent years have come to an end”.

“Given the extent of fiscal consolidation required, the minister of finance will propose tax measures to raise an additional R15 billion in 2024-2025 in the 2024 budget.”

Godongwana and treasury officials would not be drawn on whether R15 billion was a definitive figure, or what form the increases would take.

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