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The SA Daily 19 February 2019

Modest revenue shortfall

Shireen Darmalingam

  • Finance Minister Tito Mboweni will table the SA 2019 Budget in parliament  tomorrow. We expect a fiscal defict trajectory in line with the Medium Term Budget Policy Statement (MTBPS) projections, and a budget neutral for SA sovereign ratings.  
  • We expect the likely revenue shortfall for FY18/19 to be balanced by government underspending, implying some funding support for SA’s beleaguered state-owned enterprises. We foresee R15bn of underspending in FY18/19. YTD, government spending has risen only 4.6% y/y (MTBPS projection 7.7% y/y).
  • YTD, gross revenue for FY18/19 has increased 7.6% y/y (MTBPS projection 8.5% y/y) mainly due to underperforming personal income tax (PIT) and corporate income tax (CIT). YTD, PIT has increased by 7.6% y/y (MTBPS projection 9.3% y/y) and CIT has declined 1.1% y/y (MTBPS projection 3.6% y/y).
  • We therefore expect a modest revenue shortfall of R7bn for FY18/19.
  • Of the three main sources of revenue, only value added tax (VAT) has outperformed relative to MTBPS estimates. At 12.4% y/y YTD, VAT is ahead of MTBPS projections of 10.1% y/y; we expect VAT refunds to meet MTBPS forecasts. 
  • We don’t expect tax increases besides the inflation-related increases in consumption tax (fuel levy included) already incorporated into the revenue projections.

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