TAX collection so far this year is outpacing forecasts made in February, when the national budget for 2012-13 was tabled in parliament, an upbeat Finance Minister Pravin Gordhan said yesterday.
Gordhan also believed it would be possible to accommodate the higher-than-anticipated increase in public wages – about R8-billion more than budgeted for – without having to increase the budget deficit.
"Even with marginally slower GDP [gross domestic product] growth, government should still achieve the overall revenue target," the minister said in a written reply to a parliamentary question by COPE MP Nick Koornhof.
The budget forecast gross tax revenue of R826.4-billion this fiscal year.
Gordhan conceded the above-inflation wage settlement in the public sector would put pressure on departmental budgets and "narrow the space available for government to introduce new programmes over and above the current medium-term expenditure framework".
However, he stressed that the additional funding required would be found without increasing the budget deficit of 4.6%.
The state agreed to a 7% wage increase for public servants this year, two percentage points higher than the 5% provided for in the budget (not including normal pay progression), which translated into an additional cost of R8-billion. However, the settlement was lower than the 10% demanded by the trade unions.
The Reserve Bank lowered its economic growth forecast to 2.7% for this year, from its previous forecast of 2.9%, pointing to the downside risks posed by developments in the global economy, which it believed would intensify. This aligned the bank's forecast with the Treasury's budget forecast for this year.
Gordhan said slower growth forecasts did pose a risk to revenue collection targets but stressed that these risks were taken into account when the 2012-13 revenue forecast was made.
"Tax collection in 2012-13 is outpacing forecasts and, even with marginally slower GDP growth, government should still achieve the overall revenue target," he said.
The budget review emphasised the need for moderate wage increases in order to create the space for a higher share of resources to be allocated to capital and other priority areas. Gordhan in April unveiled a broad new tax compliance programme focusing in part on the construction industry, which the South African Revenue Service says is the least tax-compliant in the formal sector of the economy.
He indicated at the time that improvements in the global and domestic economy meant growth and tax revenue this year could surpass expectations, saying there was room for "cautious optimism".
The government received R742.7-billion of tax revenue in fiscal 2011-12, exceeding the budget estimate by R4-billion.