Auditing firm PwC says that the South African government collected so little tax in 2015, that significant tax increases this year are inevitable.
According to PwC, quoted in the City Press, tax collection from April to December 2015 was "shockingly poor”, and that, aside from customs tax, all other tax sources in the country were also poor.
PwC technical head of national tax, Kyle Mandy said that government is expecting its income for the coming financial year to be R20 billion less that the amount used for the budget framework.
"The current levels of taxes and other monies that government receives falls short of government’s spending needs by between 3% and 4% of GDP per year,” Mandy said.
"If something is not done about this, South Africa’s credit rating will be cut to junk status.”
Because of the cut growth expectations for the country in 2016, government won’t reach its budget targets it set in 2015 – which means the public should expect tax increases.
PwC expects a hike in personal income tax rates, as well as a jump in the general fuel levy to be announced in the budget speech this month.
Generally speaking, a tax hike is better for the economy than junk status, Mandy said.
This article first appeared on businesstech.co.za.