South Africa has a budget deficit of 3.1 % of GDP and debt on
government spending alone amounting to a staggering 48% of GDP. The
main reason for this is an abnormally large and burgeoning
government bureaucracy which is perceived to often be inefficient
and which pushes up government spending to unacceptable levels as
evidenced in the budget. This cost to government cannot easily be
reduced as fast as is required to retard or properly reduce the
deficit in the short term, so treasury has to look to alternative
sources of revenue.
The Minster announced that there is a R 30 billion shortfall in
mainly personal income tax and VAT collections due to anaemic
economic growth last year of under 1% which has impacted on wages
and personal earnings. As 95% of the countries wealth rests with
10% of the population, the higher income bracket is a logical
target to attract taxes. As we have seen, those who now earn more
than R150 000 pa have been targeted by the Minster of
