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Budget Deficit to Widen

30 November 2011   (0 Comments)
Posted by: Author: Phakamisa Ndzamela and Sasha Planting
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Budget Deficit to Widen

Deficit increases to 5.5% of GDP; National Treasury expects a R13 billion tax revenue shortfall

National treasury is estimating a R13 billion under collection in tax revenue, and this will require the government to temporarily increase its borrowings.Minister of Finance Pravin Gordhan said that tax revenue collections had not yet recovered fully from the effects of the recession.

With the shortfall of R13 billion,the estimated gross tax revenue has been reduced to R728.6 billion,largely due to a downward revision in net VAT receipts.The VAT receipts have fallen by R13,4billion to R187.5 billion, owing to an underestimation of VAT refunds for 2011/12 at the time of the budget. "What this requires is an application of our counter-cyclical policies,” Gordhan said.

He added that higher borrowing would be carefully managed as capital markets were volatile and debt servicing costs are already the fastest growing category of expenditure.However, Gordhan pointed out that Treasury would not introduce a new bond to raise more money.

Mini- Budget in a nutshell
• Treasury expects R13 billion tax revenue shortfall;
• R500 million to be spent on National Health Insurance pilot;
• Budget deficit widens to 5.5% of Gross Domestic Product (GDP);
• GDP growth revised downwards to 3.15% in 2011;
• CPI to breach 3-6% target early next year;
• Spending priorities shift from welfare to infrastructure and economic growth;
• Gordhan openly says that the mining sector is under -performing;
• Treasury to liberalise money transfer market;
• R25 billion package for business support; and
• R10.3 billion in additional appropriations (basically budget over-runs).

Source: By Phakamisa Ndzamela and Sasha Planting (Tax breaks)


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