LOST TAX REVENUE
Stubbing out illegal cigarettes will help plug SA’s budget deficit
In his medium-term budget policy statement speech last year, Finance Minister Pravin Gordhan announced that the Treasury would require an additional R28bn in the 2017-18 financial year. So what tax options are available to Treasury? Personal income tax, the biggest tax source for the fiscus, has been mooted – especially for earners at the top end. However, personal income tax underperformed in the 2016-17 budget cycle, leading to the under-collection of receipts. Value-added tax (VAT) is the next-biggest source of tax revenue and while a 1% VAT increase could raise as much as R15bn, this is likely to be a politically tough option. According to the Reserve Bank, SA’s economic growth is expected to come in at 0.4% for 2016 and is projected to be 1.1% for the current 2017. Treasury now has little option but to explore expenditure reductions and look for additional tax measures to limit growth of the budget deficit. Based on some of the pre-budget commentary, Treasury’s emphasis seems t...
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