Rev­enue un­der threat

VAT be­hind bud­get as con­sumer spending splut­ters

Finweek English Edition - - Economic Trends & Analysis - GRETA STEYN gre­tas@fin­

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.

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