REVENUE SLUMP
HILARY JOFFE: The disaster of a dim and tardy taxman
What happens to the public finances and to government’s ability to pay for social grants and other services if the latest tax trends persist? This question is at the heart of the national budget framework, after last week’s budget numbers revealed that the shortfall in tax revenues for the latest, 2016-17, fiscal year was expected to hit R30bn, and that tax buoyancy had fallen below 1 for the first time since the financial crisis. The buoyancy ratio shows the relationship between the rate of growth in tax revenue and economic growth, in nominal (money) terms. A ratio above 1 indicates tax collections are growing faster than the economy. And from about 2011, the government benefited greatly from the fact that – very surprisingly – the buoyancy ratio was running at above 1 even though the economic growth rate kept slowing down. That meant SA didn’t have to go the austerity route and do what many other countries had to do postcrisis — slash government spending. Here, by contrast, thing...
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