In the can:

Rishi Sunak, Britain’s chancellor of the exchequer, holds the budget box outside Downing Street in London on Wednesday. He announced during his speech to the House of Commons that Britain will raise corporate tax to 25% from 19% from 2023.

The actual revenue shortfall for 2020/2021 could be up to R30bn smaller than that projected in the budget based on January revenue figures, PwC tax policy leader Kyle Mandy told MPs on Wednesday.

That would assist the Treasury in marginally reducing its debt mountain, which is projected to amount to a debt-to-GDP ratio of 88.9% in 2025/2026.

In a presentation to parliament’s two finance committees during public hearings on the budget, Mandy attributed the improved revenue to betterthan-expected collection of corporate and personal income taxes and VAT, details of which emerged only after finance minister Tito Mboweni tabled the budget in parliament last week.

The budget projected a revenue shortfall of R213.2bn, an improvement of about R100bn on the R312.8bn projected in the medium-term budget policy statement (MTBPS) tabled in October 2020. Mandy said that because of improved collection the shortfall could be R183bnR200bn and urged the government not to use this windfall to loosen its purse strings.

“Based on revenue collection figures released on February 26, we believe the outlook for the remainder of the 2020/2021 fiscal year has further improved,” Mandy said. “Should revenue collections for February and March 2021 only be 1.6% lower than the corresponding months in 2020, as was the case in January, revenue collections could exceed that in the 2021 budget by more than R30bn.

“As such, we regard the revenue forecast for 2020/2021 to be conservative.”

Mandy supported the government’s decision to withdraw the R40bn in tax increases over the medium term, saying this would support economic recovery — and therefore growth in revenues — by reducing financial pressure on households and businesses.

Mandy and the fiscal cliff study group highlighted the risk of increasing tax rates.

The group, represented by Wits Business School professor Jannie Rossouw and Unisa senior economics lecturer Fanie Joubert, examines the trajectory of government’s debt-to-GDP ratio to determine when it will reach a fiscal cliff, the point at which public-service remuneration, social-assistance payments and debt-service costs absorb all government revenue.

Joubert noted that in 2021/2022 about 535,000 individual taxpayers — 7.7% of the total — will fall into the top three income-tax brackets with an income of R750,000 or more a year. These taxpayers will contribute R261bn in tax, or 50.6% of personal income tax and 20% of total government revenue. It is worrying that this group would have declined by about 9,000 individuals compared with 544,000 in the 2019/2020 tax year.

“There is little room for further tax increases on highincome earners as this tax base can emigrate,” Joubert said.

“Some estimate that between 2017 and 2020, SA lost 8,600 dollar millionaires.”

Mandy acknowledged that high income and wealth inequality in SA requires progressive tax measures but added that, according to the World Bank, SA has reached the limit that can be achieved by fiscal measures, and further reductions in inequality require higher and more inclusive economic growth. There is an overreliance on direct taxes, such as corporate and personal income taxes, and an under-reliance on indirect taxes such as VAT.

SA Institute of Tax Professionals CEO Keith Engel also expressed the belief that the country had reached the limit with its top marginal tax rate at 45%. He supported the planned reduction in the corporate tax rate from 28% to 27% from April 2021, suggesting this would probably have to drop to 25%.

The Budget Justice Coalition called on parliament to reject the budget, saying that the prowealth, pro-corporate budget “withdraws the state from its constitutional responsibilities and continues SA’s unequal development path. We believe it is critical that the committees ask whether the underlying logic of this framework supports the kind of state envisaged in the constitution. A state that must make the maximum possible resources available for promoting, respecting, protecting and fulfilling fundamental human rights including socioeconomic rights and ensuring environmental sustainability,” said coalition co-chair Busi Sibeko.

Labour federation Cosatu parliamentary co-ordinator Matthew Parks called for the extension of the R350 Covid-19 grant for the whole of the 2021/2022 fiscal year and the Unemployment Insurance Fund’s (UIF) Temporary Employer/Employee Relief Scheme (Ters) for as long as disaster-management restrictions that prevent people from working remain in place.

He said the budget was a “huge letdown” for workers and the poor and “proves there is nothing that will convince the National Treasury to abandon its addiction to destructive neoliberal policies. The essence of the budget and medium-term expenditure framework is a freeze in expenditure across the state. When inflation is factored in, this will mean cuts. This will be done on the backs of public servants through a four-year wage freeze imposition”.

The Treasury will respond to the submissions when it briefs the committees on Friday.