The government does not have to increase taxes to fund South Africa’s COVID-19 vaccine rollout, according to Old Mutual Investment Group (OMIG) Chief Economist Johann Els.
This is because of a “higher-than-anticipated” tax revenue collected in 2020, Els said in an investment note published on Thursday.
R106b budget overrun
He explained, “Something that hasn’t yet got the attention I think it deserves is that the latest figures from National Treasury show that we’re heading for a budget overrun.
“This is mainly because of higher-than-anticipated tax revenue last year, with the surplus possibly amounting to as much as R106 billion.
“Should even a portion of this windfall be realised, I see no need for government to raise taxes in this case, as has been suggested as a means to fund the vaccine rollout.”
In January, National Treasury Director-General Dondo Mogajane suggested that the government was considering increasing taxes, alongside other measures such as widening the budget deficit and reprioritising government spending, to fund the rollout.
“South Africa will not take us seriously if I can find money for South African Airways but not for vaccines,” Mogajane reportedly said.
Vaccine rollout to cost R20b
The Department of Health has estimated that the vaccine rollout will cost at least R20 billion. The aim is to achieve herd immunity by vaccinating 67 percent of South Africa’s population – or around 40 million people.
Els acknowledged that the government may wish to use the additional tax revenue to reduce the budget deficit as part of achieving fiscal consolidation targets.
However, he argued that it makes no sense to increase taxes when it is “neither needed nor in line with their long-term plan.” In addition, it could be “politically treacherous” for the ANC-led government.
“If anything, a budget overrun would be a welcome boon for the government to tackle the coronavirus through a comprehensive vaccine programme effectively,” Els argued.
Finance Minister Tito Mboweni is expected to provide more vaccine funding details when he presents the budget later this month