Picture: Denis Farrell / AP
Picture: Denis Farrell / AP

Drastic decline in tax collection leads to revenue shortfall of R50.8bn

By Amanda Visser Time of article published Oct 25, 2017

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CAPE TOWN : A drastic decline in economic growth, coupled with “a sharp deterioration” in tax collections have
led to a tax revenue shortfall of R50.8bn.

Finance Minister Malusi Gigaba acknowledged in his first Medium Term Budget Policy Statement
(MTBPS) that it is the largest under-collection since the 2009 recession.

On top of that Government will be forking out an additional R14bn for state owned enterprises, the
South African Airways and the South African Post Office, to keep them from defaulting on their

This, the minister said, are partially offset by the use of the contingency reserves as well as projected
“underspending”. He is also proposing the selling of some state assets, notably its shares in Telkom
to pay for these bailouts.

Gigaba noted that the consolidated budget deficit will widen to 4.3% of the Gross Domestic Product
in 2017-’18 against a much lower target set in the February budget of 3.1%.

“Government’s short-term options to reverse this situation are limited,” he warned.
Following several years of expenditure restraint, further budget cuts will involve hard choices and
difficult compromises. Sudden or deep additional cuts that are not well-targeted could put severe
pressure on already stressed departmental budgets.

According to Gigaba government is “acutely aware” of the dangers of unchecked debt accumulation.
In three years’ time South Africa will be using 15% of its main budget revenue just to pay its debt-
service costs.


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