SARS collections decline but government optimistic

South African Revenue Services
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SARS collections declined this year by more than R16 billion from what was estimated in 2012, Minister of Finance Pravin Gordhan revealed in the budget speech.

Job losses, upheavals in the mining sector, a slum in the world economy, problems with many economies in Europe, the United States of America and decline in the growth levels of China and India have played a part in the negative tax collection situation.

Gordhan has called on the nation to keep calm and to work to help the country achieve its development goals. SARS Commissioner Oupa Magashule described the situation as temporary, saying measures were in place to improve efficiencies and ensure compliance.

Government raises money mainly from personal, corporate and Value Added Tax and by issuing debt or bonds. All the money received by the national government is paid to the National Revenue Fund. Spending of R1.1 trillion in 2013/2014 will be funded from total revenue collections of R985.7 billion and borrowing of R163.7 billion.

By 2015/2016 total government debt will reach R1.9 trillion before stabilising and falling thereafter. Gordhan, however pointed out that government recognises the risk associated with accumulating debt and has prioritised spending amounting to R52.1 billion towards important programmes such as education, health, infrastructure and employment.

There is some concern regarding the decline in tax collection as this could slow down government’s efforts to grow the economy, which experts have said should reach the 5% mark if South Africa’s ambitious plans for job creation and a better life for all are to be met.

This growth depends largely on macroeconomic stability which should not rely on more borrowing or interest rate cuts which in themselves may further fuel inflation. Gordhan’s speech betrayed the fact that government spending has been high and is now considerably above the average level of similar countries as a proportion of GDP.

He spelled out ways in which to grow the economy to take care of the shortfalls. Government spending will be R10 billion lower than last year’s estimations and that calls for some belt tightening in several aspects of the economy.

Although the challenges facing South Africa are less than what is happening in Europe and the United States, government and all stakeholders have to take concrete steps to ensure that the country does not suffer more economic hardships and recovers from the whatever difficulties may be at play, currently.

Gordhan says he prefers the United State’s stimulus-oriented policy toolkit to the economic recovery interventions that are playing out in the Eurozone.

Kaya FM has given a breakdown of the Budget Speech and indicated that this year’s budget deficit is held at slightly more than 5% in two primary ways: firstly by that R10-billion reduction in planned expenditure and secondly by a bit of financial legerdemain.

“The contingency reserve – the pool of cash the treasury sets aside each year against unexpected spending needs – was allocated R39-billion in the three-year medium-term framework, but now this has been cut by roughly a third to R12-billion, with just R4-billion set aside for this year.

The remaining amount has been magically transmuted to the positive side of the balance sheet. Thus the budget’s big ratios retain a demeanour as calm and steady as the minister but, just below the surface, jaws are clenched and teeth are grinding.”

The radio station says Gordhan’s speech provides no answer to the tax and spending questions he so explicitly raises, although the promise of a review has been widely interpreted as prospective tax hikes.

“The real answer is in the centrality of the national development plan, with its emphasis on efficiency, predictability, clean governance and competitiveness.”

Written by: Musa Ndlangamandla – Transform SA Ad Sales/Editorial Executive.

Musa is a senior journalist from Swaziland and until January 2012 he was Chief Editor of The Swazi Observer Group of Newspapers. He is a former advisor and speech writer to King Mswati III. Musa studied Law and holds a number of certificates from leading schools of Journalism. He has travelled to over 35 countries on assignment. He also writes as a freelancer for various leading publications.

 

 

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