CAPE TOWN (Reuters) – South Africa will raise income taxes for the first time in twenty years, Finance Minister Nhlanhla Nene said in a gloomy budget speech on Wednesday, as he cut economic growth forecasts and widened budget deficit estimates.
Personal income tax will rise by one percent for everyone earning more than 181,900 rand ($15,863), in a move likely to be unpopular with the public and businesses suffering from sluggish growth in Africa’s most developed economy.
Economic growth will this year average 2 percent, down from earlier forecasts of 2.5, and will remain depressed at 2.4 percent next year, Nene said, warning that forecasts could be slashed further if the South Africa’s worst electricity shortages since 2008 get any worse.
Government revenues will remain depressed, leading to a budget deficit of 3.9 percent of GDP for the 2015/2016 financial year, above the 3.6 percent forecast in October, Nene said.
Substantial upcoming debt repayments meant government could no longer postpone raising additional revenue, including an increase to personal income tax rates.
Today’s budget is constrained by the need to consolidate our public finances, in the context of slower growth and rising debt, Nene said.