Malusi Gigaba Addresses the Tax Revenue Issue

JOHANNESBURG – After last week’s medium-term budget policy statement, sovereign credits rating agencies raised concerns about South Africa’s debt sustainability and its poor tax revenue.
Finance Minister Malusi Gigaba explained how gross national debt of 60% is not necessarily the problem.
He expressed that rising national debts become a problem when the economic growth continued to slow down, unemployment increased and the state failed to find new tax revenues.
“On the face of it, 60% is not a problem,” Gigaba said in Parliament on Tuesday. In his speech he painted a bleak picture of the state of South Africa’s economy with the projected revenue shortfall for 2017-18 a staggering R50 billion.
The Treasury also expected the gross national debt to reach 60% in 2020-21 and for the GDP growth to an average of 1.7% over the medium term.
“It becomes a problem when the economy is not growing, unemployment is high and we have no new tax revenue. If the current trend of slow growth persists, it will have an impact on growth in the long term and lead to a decline in employment, confidence and investment” Gigaba said.
The government remained committed to implementing fiscal consolidation and curbing spending to stick to its budget framework. However, fiscal consolidation was not economic policy, but a short-term intervention.

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