[30 Marks] CASE STUDY Deloitte commentary on South Africa Budget 2021/22 Finance Minister Tito Mboweni presented a budget which was an improvement compared to the October Medium-Term Budget Policy Statement (MTBPS), however, the fiscal crisis facing South Africa remains grave. He outlined aspects that gave him hope in these trying times, which include: 1. Fiscal framework that supports the economy and public health services while ensuring the sustainability of our public finances in the medium term. 2. Much improved economic outlook both globally and in South Africa. 3. Meaningful progress in the implementation of our structural economic reforms, including a R791.2 billion infrastructure investment drive. Budget explicitly supports economic transformation and job creation. Despite the message of hope projected by Minister Mboweni, South Africa faces a consolidated Budget deficit of 14% of GDP, with gross debt at about 80% of GDP for the 2021 fiscal year. Against this background, Minister Mboweni emphasised that the path to fiscal consolidation was difficult and would require us to be resolute and adamant. The debt trajectory is troubling and urgently needs to be addressed. Gross loan debt will increase from R3.95 trillion in the current year to R5.2 trillion in 2023/24. He said that we owe a lot of people a lot of money. The cost of servicing the debt detracts from capital investment in infrastructure. Investors are sceptical about South Africa's fiscal outlook and growth credibility. South Africa's economy is expected to grow 3.3% in 2021 and average 1.9% in the next two years. National Treasury has developed a R6.2 trillion spending plan over the next three years to implement the Economic Reconstruction and Recovery Plan. The main drivers of the more positive outlook are better than expected household spending and increased value of commodity exports. However, the COVID-19 path remains uncertain and unknown and may remain a threat to the projected growth in the economy. Government now expects to collect R1.21 trillion in taxes during 2020/21, R213 billion less than expected at the start of the year. While better than anticipated at mid-year (by almost R100 billion) this is nevertheless the largest tax shortfall on record. South Africa has a tax-to-GDP ratio of 24.6% in the 2021 fiscal year. Although lower than the Organisation for Economic Co-operation and Development average, South Africa's ratio is still relatively high compared with other developing countries. There are no tax increases except for excise duties (above inflation) and fuel levies (in line with inflation). The Minister has elected to put on hold the tax measures to generate additional tax revenue of R40 billion over four years - as initially proposed in the October MTBPS. Personal income tax brackets have been adjusted by 5% - above inflation - for R2.5 billion in tax relief. Corporate income tax will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022. Further rate decreases are being considered. increase taxes by: It is encouraging that the Minister has chosen to bolster capacity at South African Revenue Service (SARS) rather than - deepen technology, data and machine learning capability profit shifting and tax crime - expand specialised audit and investigative skills in the tax and customs areas to renew its focus on base erosion and - establish a dedicated unit to improve compliance of wealthy individuals with complex financial affairs. To support the above, SARS has been allocated additional spending of R3 billion over the medium term. and invest in the future. The Minister emphasised that this was not an austerity budget. However, it is essential to narrow the public finance deficit Source:https:/www2.deloitte.com/za/en/pages/tax/articles/deloitte-commentary-2021-22.html. Answer ALL the questions in this section.only statement. Question 2 (15 Marks) The article states that, "South Africa's economy is expected to grow 3.3% in 2021" financial year. Critically analyse and discuss the above statement. Provide reasons to support your