BUDGET 2018: IT’S A NUMBERS GAME
23 Mar 2018
South Africa’s budget paints a very interesting picture when one drills down into the numbers involved. The annual national budget presented in Parliament on 21 February 2018 by Finance Minister Malusi Gigaba presented South Africa’s biggest budget yet, providing for budgeted consolidated Government expenditure over the 2018/2019 fiscal year in the amount of R1,657,200,000,000!
Of this, by far the most significant portion will be spent towards social services to be delivered in the form of education, healthcare, social development and community development and infrastructure: R1,012.2 billion, or 61.08% (2017/2018 budget: 56.5%) to be exact. (Of this, a massive R528.4 billion will be directly allocated to social grants, or 31.9% of the total budget.) A further R200.8 billion is allocated to defence and public safety, with agriculture and economic affairs receiving R200.1 billion. General public services (departments such as Treasury, Foreign Affairs and the various legislative organs) are to receive R64 billion of the 2018 budget, while it is further notable that 11% of the total budget is allocated to servicing Government debt.
On the income side, taxes remain Government’s primary source of revenue, and budgeted revenue in tax collections are estimated to be collected as follows:
Direct income taxes, unsurprisingly, remain the major contributor to the Government purse at more than 55% and borne by those individuals economically active.
It was widely reported in the run-up to the budget speech that a shortfall in tax revenue of approximately R50.8 billion would need to be recognised for the current fiscal year, and that Government would need to be creative in meeting this challenge going forward, specifically in identifying where it would raise taxes to cover this, particularly in light thereof that it is clearly running out of options.
The shortfall ended up being slightly less drastic than expected, equalling R48.2 billion for the 2017 / 2018 fiscal year. Government expects to recover this shortfall through a renewed focus on tax compliance. It also hopes to increase revenues from the increased VAT rate by R22.9 billion, and R6.8 billion from “bracket creep” (i.e. non-adjustment of tax brackets for individuals). The new increased tax bracket for estate duty (a 25% tax rate for estates in excess of R30 million) is expected to contribute a mere R150 million more to the fiscus.