HOW FUNDS ARE USED
Pravin Gordhan’s budget reflects a decade of overspending
Finance Minister Pravin Gordhan provided SA with as good a national budget as was possible under difficult circumstances. However, this budget is a holding operation. Increased taxes were imposed to restrain the deficit and prevent it from widening. Greater spending had to be deferred to a future date when, hopefully, faster growth will deliver increased tax revenue to fund it. The budget must be seen against a decade-long backdrop of increased government spending outstripping both GDP growth and rises in tax revenue. As a result, government spending jumped from 24.6% of GDP in 2007 to 30% of GDP today. Taxes failed to keep pace. Tax collections were about 24% of GDP from 2010-14. They rose to 26% of GDP in 2016 as a result of improved corporate profits and increases in tax rates. To reach the projected 26.2% of GDP in the coming year, tax collections will have to be the highest in our history. Yet even this will not be enough to cover expenditure, let alone calls for more. Past inc...
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