Expect a lower tax shortfall – HSBC

But the economic outlook remains tough.
Small businesses are still struggling. Image: Shutterstock

National Treasury could be on track to have a better fiscal cushion for the 2020/21 budget than it initially projected.

Treasury anticipated that the tax shortfall would be as much as R300 billion in the Medium-Term Budget Policy Statement (MTBPS) in November 2020.

But in a research note released on Monday, HSBC Global Research says the shortfall does not look like it will be as high as first thought, as gross tax collection in November was up 3% when measured year on year.

HSBC now expects the tax shortfall to be R251 billion and the deficit to be 13.5% of GDP, as compared with a deficit of 15.7% projected in the MTBPS.

Source: National Treasury, HSBC estimate

Tax revenues were primarily boosted by rises in value-added tax (Vat), fuel taxes and excise duties.

The rise in revenue coming from personal income taxes, corporate income taxes and taxes on international transactions was more muted.

Source: National Treasury, HSBC estimate

The reduction in the tax shortfall along with National Treasury’s willingness when it comes to issuing bonds will provide the government with a cash buffer and give it some protection against possible fiscal slippages.

Read: Difficult year ahead for SA – BNP Paribas

Source: National Treasury, HSBC estimate

A tough November

Though the reduction in the tax shortfall is good news, HSBC notes that there was a 0.8% contraction in economic activity in November, when measured month on month.

This is the first contraction since the Level 5 Covid-19 lockdown resulted in economic activity slumping 40% in April and follows weak growth in September and October.

The bank notes that mining was the main driver of the decline, falling 5.7% month on month, mostly as a result of a tightening in the platinum group metals sector. There was also a broad-based decline in manufacturing output.

These sectors were not the only ones to face headwinds.

“Tourist income edged higher in November, but hotel occupancy rates remained below 20%, motor trade sales were flat [month on month], and the food and beverage industry saw spending nudge lower.”

The value of building completions plunged to its lowest since June, and the impact of the lockdown on the hospitality sector “remains pronounced”, with tourism income down 67% year on year and restaurant spending 50% lower.

Source: National Treasury, HSBC

HSBC does not expect a quick recovery.

“We forecast a marked slowdown in GDP growth from the strong rebound in the third quarter, but still expect the economy to expand at an annualised rate of 6.5%.”

The poor performance of smaller businesses in November is also not a good indicator.

“Small business turnover data suggest there may be worse to come at the start of 2021, amid the second wave of Covid-19 infections and renewed lockdown restrictions, although there are signs that the second wave peak may have been passed.”



Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.


Expect the same level of corruption and mismanagement from the ANC.

This report is a bit rich coming from HSBC Bank (and we will park that there!).

However it does not take into consideration the latest Level 3 lockdown and its draconian impact it has had on the busiest time of the year for Tourism, Restaurants, Brewing/Wineries, Agriculture (wine farms impacted by alcohol ban), Air travel, sports, events etc.

In an article on this very platform by Mike Shussler where the actual taxes paid over is going to be dramatically cut – and then to add in the alcohol ban where vendors are going to request a refund/tax suspension of Excise Taxes, HSBC is way off with their assessment.

The shortfall is now going to be in excess of R300bn. Watch this space.

Cant pay tax if we cant work

I see Eddie is making it a criminal offence if you forgot some tax matters…just wondering when Nomvula Mokonyane’s Aston Martin is hitting the auctions …and she the orange overalls

She is part of the glorious movement according to Mabuza.

End of comments.



Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.

Follow us:

Search Articles:
Click a Company: