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Cape Town - While government may have to raise taxes in future to fund public spending commitments, Finance Minister Pravin Gordhan induced a collective sigh of relief from all South Africans when declaring no intention to raise the overall tax burden this year.
Despite emerging from one of the most challenging periods for tax collection - a period in which the SA Revenue Service (Sars) collected R69bn less than budgeted - Gordhan said the state of the economy and the financial stress of households needed to be taken into account.
"We do not propose to raise the overall tax burden this year."
Gordhan estimated that consolidated tax revenue would be R658bn in 2009/10 - R32bn less than in the past fiscal year.
The big "culprits" were R22bn less in VAT collected and a R30bn drop in corporate income tax.
Gordhan reckoned government would continue to face revenue challenges in 2010/11, as tax revenue growth was likely to lag the recovery.
"Given the gap between spending and revenue, alongside efforts to curb spending growth, government requires more tax revenue."
He said the preferred method of achieving higher revenues was through base broadening, closing loopholes and improving tax compliance.
Additional environmental taxes would also be explored to raise additional revenue.
"Notwithstanding this, we may have to raise taxes in future to fund our public spending commitments."
At the traditional pre-Budget speech press conference, Gordhan said the possibility of raising taxes would be looked at more closely in September or October this year.
"The world is a very volatile place... we won't have to raise taxes if Sars delivers more tax this year."
For now, Gordhan proposed "moderate tax relief" for households - to "assist in sustaining the economic recovery".
He disclosed that tax relief for individuals, mainly those in lower income brackets, would top R6.5bn. This figure would largely compensate for the effects of inflation (or "bracket creep").
Take a look at the
Budget
tax tables.
- Fin24.com