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The Medium-Term Budget Policy Statement (MTBPS), set to be unveiled by Finance Minister Enoch Godongwana on 1 November 2023, comes with the backdrop of poor global and local growth, falling revenues and cost pressures for households, business, and government.
As an alternative to raising taxes, government should focus on improving the efficiency of revenue collection through digitisation, modernisation of tax systems and deploying artificial intelligence (AI).
An important question that the MTBPS must answer is the true state of government finances as well as the growth, inflation, and job creation outlook.
The Bureau for Economic Research reported last month that inflation expectation across business, labour and analysts have declined for the first time in two years. However, this piece of good news was followed by the country’s largest medical schemes announcing their customary above inflation increases.
This suggests that medical inflation will remain high into the first quarter of next year, to go with still high food inflation which is also subject to upside risks given El Nino weather patterns, rand depreciation but also risks posed by fuel prices.
National Treasury may have to revise downwards gross tax revenue of R1.8 trillion announced in the February Budget Review. Tax revenue overruns have disappeared due to slowdown in commodity prices and uneven global growth, which in turn have impacted corporate income taxes. If National Treasury also pencils in lower economic growth (expected at 0.9% at the beginning of 2023), this could see a deterioration of key fiscal indicators