During his Medium-Term Budget Policy Statement (MTBPS) speech on Wednesday 28 October, Finance Minister Tito Mboweni gave South African citizens some worrying news regarding taxes, saying that in order to replenish under-collecting Treasury’s coffers, taxes will increase by R5 billion in the next financial year, with further increases to follow until 2024/25.
He cited the ambition to consolidate debt and continue to spend on infrastructure projects as having necessitated the projected increases, but did not further elaborate on where these tax increases would be allocated specifically.
Tax increases to help consolidate Economic Recovery Plan
To assist with the consolidation of debt currently amounting to , government has projected tax increases of R5 billion in 2021/22, R10 billion in 2022/23, R10 billion in 2023/24 and R15 billion in 2024/25.
Mboweni said that in order to rebuild our economy and recover from the devastation brought on us by COVID-19”, a combination of expenditure and revenue measures will narrow the main budget deficit from 14.6 per cent of GDP in 2020/21 to 7.3 per cent by 2023/24. He said that gross national debt is projected to stabilise at 95.3 per cent of GDP by 2025/26.
Mboweni made no mention of the proposed wealth tax and other austerity measures that were at his disposal to mechanise the recouping of revenue to be used to facilitate the economic recovery plan outlined by President Cyril Ramaphosa earlier in October. He also did not mention the proposed fuel levy increase or estate duty.
Budget speech omits details of proposed tax increases
Economists from Bloomberg previously warned that the
“Finance minister Tito Mboweni has tied himself to the mast with an ambitious plan to drastically cut expenditure and move toward debt stabilisation by 2023-24. We think the scale and pace of his envisioned consolidation is unlikely to materialise or put debt back on a sustainable path.”
“Instead, it risks plunging the country into an even deeper crisis. A more credible strategy in our view, is big stimulus now, accelerated reform, and a credible commitment to cut expenditure when the recovery has gathered pace.”
The full MTBPS can be read here.
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