AFTER lopping R5 billion off his estimates for tax revenue in the current fiscal year, Pravin Gordhan revised his forecast for tax revenue in the next fiscal year, down R12.2 billion.
In the medium-term budget, tax revenue for 2013/14 is estimated at R901.4bn, while in the budget review in February, it was put at R913.6bn, a reduction of about 1.3 percent.
The new estimates come after the medium-term budget cut the next calendar year’s growth forecasts, from 3.6 percent to 3 percent and that of the fiscal year from 3.8 percent to 3.2 percent.
Econometrix chief economist Azar Jammine calculates a 0.6 percentage point adjustment in growth expectations would reduce government revenue by about 1.5 percent. “This translates into a reduction in budgeted government revenue of R14bn to R16bn,” Jammine said.
Whatever the precise number, the revenue shortfall will produce a larger deficit because there is little space for government to cut spending.
Jammine noted that, a year ago, upward revisions of budget deficits were received negatively by financial markets. He said this was “an important contributory factor to the subsequent placement of the country’s credit rating on a negative watch”. South Africa has subsequently been downgraded by two of three major rating agencies. – Ethel Hazelhurst