Finance Minister Tito Mboweni says government expects to miss its tax revenue target by over R300 billion this year.
The Minister said this when he tabled the Supplementary Budget Review to the National Assembly on Wednesday. The budget was necessitated by President Cyril Ramaphosas announcement that government would spend R500 billion to support the economys resuscitation following the outbreak of novel Coronavirus.
Gross tax revenue collected during the first two months of 2020/21 was R142 billion, compared to the initial forecast of R177.3 billion for the same period.
Put another way we are already R35.3 billion behind on our 2020/21 target. As a consequence, gross tax revenue for the 2020/21 fiscal year is revised down from R1.43 trillion to R1.12 trillion. That means that we expect to miss our tax target for this year by over R300 billion, he said.
Mboweni said part of the revision was because the measures announced earlier this year give taxpayers outright relief of R26 billion and delays in tax collection of approximately R44 billion.
These proposals are contained in the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration Bill that I table today.
Taken together the measures and adjustments we present translate into a consolidated budget deficit of R761.7 billion, or 15.7% of GDP in 2020/21. This is compared to the deficit of R370.5 billion, or 6.8% of GDP projected in February. This increase is mainly due to the revised revenue projections and pay-outs from the Unemployment Insurance Fund.
The narrower measure, known as the main budget deficit, is projected to be 14.6% of GDP, he said.
Proposals to bolster revenue collection
In a media briefing following the Ministers speech, National Treasury Director-General Dondo Mogajane said in response to the rising budget deficit, Cabinet approved that an active approach be taken to bolster revenue collection.
This, he said, would also deal with, among other things, issues of tax avoidance.
In the active scenario, government stabilises debt through a combination of reforms that boost economic growth and measures to increase revenue collection and lower expenditure.
Cabinet has adopted the active approach. It has endorsed the target of a primary surplus by 2023/24, meaning revenue will exceed non-interest expenditure. This will require spending reductions and revenue adjustments amounting to approximately R250 billion over the next two years.
These measures require difficult choices that will affect the economy and distribution of public resources.
The measures will be detailed further in the 2020 Medium Term Budget Policy Statement.