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Finance Minister Enoch Godongwana hinted about tax increases to fund the government\u2019s growing expense bill during\u00a0News24\u2019s 2023 On The Record Summit.<\/p>\n
Godongwana said South Africa\u2019s economic growth and tax revenue have been hampered by the energy crisis, with record load-shedding levels and logistics problems.<\/p>\n
Therefore, the government\u2019s revenue for this financial year is projected to be significantly lower than initial estimates.<\/p>\n
The National Treasury revealed that the budget moved to a deficit of R143.8 billion for July, the largest since 2004 and wider than the R115.5 billion forecast by economists.<\/p>\n
The Bureau for Economic Research said the fiscal balance is being squeezed from the revenue and expenditure sides.<\/p>\n
If the current pace of underperformance in tax collections is sustained throughout the year, gross tax revenue will be R82 billion lower than the February projection.<\/p>\n
Godongwana said there are three ways to address the revenue shortfall and fiscal deficit.<\/p>\n
\u201cI suspect you may need a combination of these instruments moving forward. You will probably get that on 25 October during the medium-term budget policy statement,\u201d he said.<\/p>\n
The Finance Minister said the task of balancing the budget is made more difficult because of the general elections next year.<\/p>\n
\u201cDuring an election, nobody wants to increase taxes, but everybody wants to increase expenditure to buy votes. You can\u2019t have both,\u201d he said.<\/p>\n
\u201cI said in February that if some of the things we are funding now become a permanent fixture, we must find a revenue source for them.\u201d<\/p>\n
He referred to things like the R350 social relief of distress grant (SRD Grant), which was introduced during the Covid-19 pandemic.<\/p>\n
Over the weekend, President Cyril Ramaphosa said the R350 grant laid the foundation for introducing a basic income grant.<\/p>\n
He said the successful implementation of the R350 grant has shown that the government can roll out a basic income grant of a similar nature.<\/p>\n
Godongwana cautioned against thinking that things that were easily funded during a commodity boom and revenue overruns can continue.<\/p>\n
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The National Treasury has proposed\u00a0drastic steps to rein in spending as the government has run out of money and faces a debt trap.<\/p>\n
It includes a freeze on new public service jobs, stopping procurement contracts for all infrastructure projects, and keeping public servant salary increases in check.<\/p>\n
However, despite the state continuing to spend far more than it gets in with a growing fiscal deficit, not everyone is keen to reduce spending.<\/p>\n
President Cyril Ramaphosa recently said lower spending is \u201cnot necessarily\u201d the answer to the country\u2019s fiscal challenges.<\/p>\n
\u201cThe revenue projections that we had have been lower than what we had anticipated. That immediately tells you that we are going to have headwinds,\u201d Ramaphosa said.<\/p>\n
\u201cWhat should we do? The discussion is ongoing. It is not necessarily cutting spending. It is seeing how best you focus on your key delivery areas.\u201d<\/p>\n
\u201cAfter considering key investment areas, you look at how you recalibrate the other spending, you re-prioritise.\u201d<\/p>\n
Without spending cuts or rapid economic growth, South Africa\u2019s debt will continue to grow, and it will continue to spend more on servicing interest on this debt.<\/p>\n
It can lead to a debt spiral, ultimately resulting in high inflation levels, further stifling economic growth.<\/p>\n
The outcome of this situation can be devastating for a country, which is why many experts are urging the government to cut spending as a matter of urgency.<\/p>\n","protected":false},"excerpt":{"rendered":"
Finance Minister Enoch Godongwana hinted about tax increases to fund the government\u2019s growing expense bill during\u00a0News24\u2019s 2023 On The Record Summit. Godongwana said South Africa\u2019s…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1365","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1365"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1365\/revisions"}],"predecessor-version":[{"id":1368,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1365\/revisions\/1368"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}