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South Africa moots higher taxes to fund coronavirus vaccine rollout

PUBLISHED: Wed, 20 Jan 2021 13:05:10 GMT

Key Points
  • South African National Treasury considers a tax hike to pay for vaccines.
  • More than 1.3 million cases of the virus and over 38,000 deaths recorded in the past year
Dondo Mogajane, director general of the South African National Treasury, speaks during an interview in Cape Town, South Africa, on Wednesday, Feb. 26, 2020. Moodys Investors Service in November gave Mboweni just under four months to come up with a credible plan to rein in government debt and get the economy growing. Photographer: Dwayne Senior/Bloomberg via Getty Images

South Africa’s National Treasury has suggested that the government raise taxes to fund the rollout of Covid-19 vaccines in Africa’s worst coronavirus hotspot.

Director General of the National Treasury Dondo Mogajane told a local radio station that higher taxes were one option the Treasury was looking at to provide the approximately R15 billion rand ($1 billion) required to fund the vaccines. The final decision will be announced by Finance Minister Tito Mboweni in his budget next month.

“If we have to tax to ensure that we get this money, we will do it. On the Budget Day, we will be detailing what option (we take) and it will be detailed enough to indicate where the money will come from,’’ Mogajane told Radio 702. “Commitment is there to pay for this.”

South Africa has recorded more than 1.3 million cases of the virus and over 38,000 deaths in the past year, just under half of the total cases registered on the continent. President Cyril Ramaphosa yesterday established an inter-ministerial committee chaired by Deputy David Mabuza to manage the rollout.

South Africa says it has secured some 20 million doses which scheduled to be distributed in the first half of the year. The Serum Institute of India (SII) is expected to be among the first providers with about a million supplied this month and 500,000 doses in February.

Mogajane said there were very few choices for the government to consider in the battle to save lives.

“One way or the other, we will have to bite the bullet, we have to do it for the sake of South Africans and saving lives. We have to do everything in our power to make sure that we buy these vaccines and vaccinate South Africans.”

North West University Business School Professor Raymond Parsons argued against raising taxes in an economy that suffered a recession last year and has seen sub-optimal growth for the past decade.

“…Raising the tax burden may be inevitable but it is the least desirable option, especially if it simply creates a negative ‘tax-and-spend’ cycle. It also comes at a time when a ‘low trust’ situation prevails in SA about the use of government funds. Tax hikes should be minimized so as not to damage economic recovery,”

He said the ideal solution would be for the funds to be mainly found through additional reprioritisation of state spending, better collection of existing taxes and renewed economic growth which boosts tax revenues.


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