Treasury's options to make up for revenue shortfall not straightforward: IEJ

JOHANNESBURG - The Institute for Economic Justice (IEJ) says the options on the table for the National Treasury to make up the expected revenue shortfall are not cut and dried.

Minister of Finance Enoch Godongwana has made a 180-degree turn on the value-added tax (VAT) hike proposed in the 2025 budget, following a collective pushback from political parties and civil groups.

This means the VAT standard rate will remain at 15%.

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The scrapping of the 0.5% VAT increase is expected to result in a R75 billion revenue shortfall.

Already battling a high debt burden, the government has previously been warned to avoid raising more debt.

Other than raising debt, other alternatives that have been touted by various analysts include lowering expenditure or again dipping into the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).

The tax and budget policy researcher at the IEJ, Zimbali Mncube, said reversing tax rebates could also go a long way.

“If they could be reversed, government could also raise revenue very easily and the R75 billion would be covered by that or reversing those repeats. 

“I wouldn’t say it’s even loans or cutting expenditure, it’s also about considering every alternative that the government has at its disposal, and we are saying it’s time that these are considered.”

The National Treasury is set to consider these and other proposals as potential amendments in upcoming budgets, as mechanisms to increase the resources available.