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South Africa to Increase Tax Revenue Amidst Rising Debt Projections

South Africa to Increase Tax Revenue Amidst Rising Debt Projections

  • South Africa’s finance minister plans to introduce tax reforms in the coming year to address fiscal challenges.
  • Revenue collections in the current 2023/24 fiscal year are now forecast to be 56.8 billion rand ($3.04 billion) below estimates in February.
  • The treasury has announced that the government will secure $2.4 billion in concessional funding in the fiscal year 2023/24 to fulfil its foreign-currency obligations.

South Africa’s finance minister plans to introduce tax reforms in the coming year to address fiscal challenges caused by reduced mining revenue, as indicated in the mid-term budget review released on Wednesday.

The budget report presented to parliament projects larger deficits over the next three years and higher debt levels compared to the main budget tabled in February.

Revenue collections in the current 2023/24 fiscal year are now forecast to be 56.8 billion rand ($3.04 billion) below estimates in February.

The National Treasury has expressed its commitment to implementing spending reductions, moderate tax measures and efficiency gains from merging or closing public entities, some of which have required repeated bailouts in recent years, Reuters reported.

Given the extent of fiscal consolidation required, the Minister of Finance will propose tax measures to raise additional revenue of 15 billion rand in 2024/25 in the 2024 budget,” the treasury said.

The treasury did not provide specific details regarding the envisaged tax measures. Finance Minister Enoch Godongwana said in a speech that “our most effective way of funding government is through an efficient tax administration and by broadening the tax base.

South Africa’s Finance Minister Enoch Godongwana

The economic growth forecast for South Africa in 2023 has been revised to 0.8%, down from the 0.9% projected in February and a significant drop from the 1.9% growth achieved in the previous year.

This downward trend can be attributed to the severe and prolonged power shortages, the worst on record, caused by the struggling state utility Eskom. Also, inefficiencies in transportation, particularly within the freight rail, ports, and pipelines managed by Transnet are additional factors.

Business Insider

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