Tax base must expand – Gordhan Jul 3 2012 8:52AM
South Africa’s employment base needs to be expanded substantially to boost the tax revenue universe, Finance Minister Pravin Gordhan said on Monday
The minister’s comments came amid rising concerns that South Africa was growing an unsustainable base of social welfare beneficiaries while the productive tax base was not growing fast enough. The number of people on social grants has exploded to around 15 million while the number of employed hovers around 13.7 million.
A senior economist at Efficient Group, Merina Willemse, said it was ideal to expand employment because that is the only solution for the country’s problems. She added that government tended to focus more on spending and less on revenue.
Gordhan said more than 40 million consumers in South Africa make a contribution to the fiscus through various taxes – be it income tax on earnings, capital gains, the fuel levy or VAT, but the reality was the productive tax base was not wide enough.
He said although the fiscal strength and stability has been growing each year, increasing from R114bn in 1994 to over R742.7bn last year, the country needed to show strong growth in employment to boost its tax revenue.
The minister said there were 13.7 million South Africans employed and registered for tax, but many in this group do not pay tax because of being under the tax threshold. “We need more business operations in this country and more producers, more jobs in order to create more taxpayers.”
He said this season the government was expecting a revenue collection of about R827.3bn and R927bn in 2013. While observers have raised fiscal sustainability concerns, Gordhan said South Africa’s debt load was still better compared to other countries despite the R60bn loss in revenue in the 2009 recession yet to be recovered.
The minister urged South Africans to try to live within their means in light of the worsening debt crisis in Europe.
He added that fiscal strength will still play a vital role in sustaining government targets and in growing the economy in general. “Complaints of lack
of money to render services to the people must not be
an excuse, taking into account that the government will make sure that it funds good projects which will benefit all South Africans.”
He said the national treasury was prepared to find money for good projects and would guide the government on whether public money was used effectively.