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The main trends of the MTBPS

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The MTBPS speaks to revenue and expenditure trends over the medium term, specifically to the period ending in the 2021/22 financial year.

Between now and then, government revenue is expected to rise by one-quarter (26%).

More than one-third of this revenue currently comes from personal (income) taxes making income taxes the single largest source of state revenue. The balance of revenue is derived from VAT, corporate taxes and various other taxes and levies.

It is anticipated that individuals will shoulder an increasing proportion of the tax burden over the medium term.

Currently, personal income accounts for 36% of budget revenue but by 2021/22 this proportion will rise to 40%.

By contrast corporate tax share will drop slightly from the current 18 to 16%.

The biggest increase in the tax burden between now and 2018/19 will be the 31% increase in VAT receipts. This indicates that consumers cannot expect relief from this year’s increase in the VAT rate.

The zero rating of VAT has been expanded to include three new items: sanitary pads, bread flour and cake flour.

Government loan debt is also expected to grow faster than tax revenue.

By 2021/22, total government loan debt is expected to rise to R3 680 billion. This is 30% more than the current R2 817 billion. The minister thus seems to accept that borrowing by the state is set to increase markedly.

Presumably, this income is to be used on, inter alia, infrastructure projects that will stimulate economic growth.

For the first time, National Treasury has published details of expenditure on infrastructure development.

Over the next three years, public infrastructure expenditure is estimated to be R855.2 billion.

In the 2018/19 financial year, state spending on planned or current infrastructure amounts to R135-billion.

Investment on these (current) projects will increase by 13% in 2021/22.

The biggest infrastructure developments are the housing programmes and the development of tertiary education institutions.

The Department of Human Settlements is expected to spend R18-billion in 2018/19 while investment in tertiary education facilities will amount to R2.7-billion.

The largest single investment in infrastructure are the improvements to train rolling stock. This programme is expected to cost R4.6-billion in the currently financial year and will rise to R8.5-billion in 2021/22.

Growth in infrastructure (without new projects) is substantially lower than that of tax revenue, lending or GDP. Numerous additional development projects will be required if infrastructure investment is to keep abreast of economic changes and stimulate the economic growth.

To address this, Treasury will establish an “Infrastructure Fund.” This fund will draw on the expertise of development finance institutions, multilateral development banks and private banks which have committed technical resources to help finance, plan and implement projects.

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