Revenue under threat
VAT behind budget as consumer spending splutters
THE ERA OF LARGE Government revenue overruns looks like it’s over – despite a small current overrun – and there’s a danger that the economic slowdown will lead to below Budget revenue collection for the 2008/2009 fiscal year.
An analysis by Stanlib economist Kevin Lings for the fiscal year to end-June found revenue received from expenditure taxes – such as VAT, which depends on consumer spending – is running behind budget. However, that’s overshadowed by the fact that revenue from taxes on income and profits is well ahead of budget.
The SA economy is slowing and that’s showing up in Government’s revenue collection. Areas affected include VAT, transfer duties on property, the fuel levy and customs duties. By contrast, income tax has done well as salaries have risen by almost 9% this year, while employment conditions have only been marginally negative. Similarly, corporate profits have been doing well, reflecting the performance of the economy over the past year – but not necessarily the most recent slowdown in activity. Lings says it’s possible that taxes on profits and income will also come under pressure in the months ahead.