The National Treasury is considering the possibility of instituting an inheritance tax and a limited-duration solidarity tax, according to a Bloomberg report.
The publication cited anonymous sources who were part of confidential discussions Finance Minister Tito Mboweni held with selected clients of Standard and Absa banks.
Mboweni reportedly told the clients that Treasury has no plans to raise value-added tax (VAT) or income and corporate taxes despite projected revenue shortfalls.
In his supplementary budget speech last week, Mboweni said the government will miss its revenue target by R300 billion. In February, he also announced various personal income tax relief measures.
The government increased VAT in 2018, a decision that proved politically unpopular. The corporate incomes tax rate in South Africa is 28 percent against a global average of 24 percent, which leaves little room for upward adjustment.
This leaves inheritance and solidarity tax as options, according to the report. The solidarity tax, if adopted, would be linked to the COVID-19 pandemic and would therefore be limited in duration.
In its supplementary budget, the National Treasury said it would need to increase taxes by “R5 billion in 2021/22, R10 billion in 2022/23, R10 billion in 2023/24 and R15 billion in 2024/25” to achieve fiscal consolidation in the wake of the pandemic.
The Minister also said last week that the government will have a budget deficit of R761.7 billion, or 15.7 percent of GDP in 2020/21.
“Our early projection is that gross national debt will be close to R4 trillion, or 81.8 percent of GDP by the end of this fiscal year. This is compared to an estimate of R3.56 trillion or 65.6 percent of GDP projected in February,” Mboweni said.
The government therefore intends to borrow $7 billion from international finance institutions to help fund its response to the pandemic.
Discussions with the International Monetary Fund (IMF) for a $4.2 billion loan (around R72 billion) are ongoing despite resistance from some within the governing African National Congress (ANC) and its alliance.
Last week, the government secured a $1 billion (around R17 billion) emergency loan from the New Development Bank (NDB), an institution established by the Brazil, Russia, India, China and South Africa (BRICS) formation.