Government Proposes No Overall Increase in Taxes for 2020/21

Government Proposes No Overall Increase in Taxes for 2020/21

Written on 02/26/2020
MJ Minter Inc


Revenue for 2019/20 is now R63.3 billion lower than the estimate at the time of the 2019 Budget.

This under-collection exceeds that of 2009/10, in the immediate aftermath of the global financial crisis. The shortfall is a consequence of weakening economic growth, and largely matches the lower GDP growth forecast.

Over the past five years, government has implemented large tax increases. But the difference between projected and collected revenue has grown progressively larger in the face of a persistent slowdown in economic growth and a weakened SARS. In the last 12 months, the new SARS leadership has taken steps to revive the institution, and tax administration has started to recover – but the economy has not.

Growth in wages, consumption and business profitability has stagnated in recent years, lowering tax receipts for personal income tax, value-added tax (VAT) and corporate income tax, which make up more than 80 per cent of total tax revenue.

In this context, substantial tax increases are unlikely to be effective. South Africa already has a relatively high tax-to-GDP ratio compared with other countries at a similar level of development. New tax increases at this time could harm the economy’s ability to recover. Consequently, government will not raise additional revenue from tax proposals for 2020/21.