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UPDATE 2-South Africa may miss tax target over recession


Reuters South Africa
Updated: 10-09-2018 15:42 IST

South Africa's tax take could well be lower than forecast this financial year, with a recession compounding problems at the tax revenue service, Finance Minister Nhlanhla Nene said on Monday.

Nene said tax avoidance and evasion would rise in any economy that was growing slowly and where taxes have been increased, and the fall in GDP would only worsen matters.

The country entered recession in the second quarter for the first time since 2009, data showed last week, weakening the rand and government bonds.

"There is now additional downside risk to the tax revenue projected at the beginning of the year because of the contraction in the economy," Nene told a tax conference, referring to the financial year ending next March.

"Fixing our economy to ensure that it grows faster and in a more sustainable manner is therefore critical."

Nene also cited problems at the South African revenue service (SARS).

President Cyril Ramaphosa, who has staked his leadership on reviving an economy that lost momentum under his predecessor Jacob Zuma, suspended SARS commissioner Tom Moyane in March over alleged misconduct.

Two months later he established an inquiry into the allegations, which cover events during Zuma's scandal-plagued administration. Moyane has denied wrongdoing.

In its February budget, the Treasury said it faced a 48.2 billion and revenue gap in the 2017/18 fiscal year, partly due to SARS missing its collection targets. It also increased value added tax (VAT) for the first time since 1993.

Tax shortfalls in the past two years had been partly been due to slower than projected economic growth, while tax evasion was also a factor, Nene said.

"Some taxpayers are taking it upon themselves to pay as little tax as possible. Such behavior not only negatively affects collection ... (but) creates more social discontent," Nene said.

Rating agency Moody's said South Africa's slide into recession in the second quarter - which Ramaphosa said would be temporary. - would complicate its fiscal and monetary challenges.

Analysts say Africa's most developed economy needs faster economic growth if it is to reduce high unemployment - currently at 27 percent - and alleviate poverty and the inequality that stokes instability.

Unemployment is a hot-button issue ahead of national elections in 2019, and the governing African National Congress (ANC) has made repeated pledges that things will improve.

COUNTRY : South Africa

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