The Treasury has the unenviable task of figuring out how to wring more taxes from a slower-growing economy. SA faces a low-growth trap, with growth of 1.3% forecast for 2017, and the outlook for this year revised down to 0.5%. Despite these meagre growth prospects, the government wants to increase tax revenue by R28bn in the next fiscal year, which starts in March 2017. The tax revenue shortfall for the current fiscal period is R23bn. Finance Minister Pravin Gordhan made the announcement in his medium-term budget policy statement, calling for an additional R13bn in 2017-18 on top of the initial R15bn announced in February. Kyle Mandy, tax partner at PwC, says the proposed increase in tax revenue will raise SA’s ratio of tax to gross domestic product (GDP) to 28.2%. If local government taxes are added, it would take the ratio to nearly 29.5% of GDP from 25.8% in 2015. a country’s tax-GDP ratio decreases when economic growth slows. The vexing question is, where will the additional tax...
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