Will S. Africa announce more tax increases in the coming budget speech?

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South Africa’s Finance Minister Malusi Gigaba is delivering the national budget speech on Wednesday. His upcoming address is of great importance as South Africa grapples with a weak economy, lower revenues and leadership change.

Gigaba needs to plug the revenue shortfall. South Africa’s budget deficit is projected to widen from 3.1 percent to 4.3 percent of GDP in the current fiscal year, while tax revenue is expected to fall nearly 4 billion US dollars short of earlier estimates. The government needs to find funds for free tertiary education and other unanticipated costs.

Higher taxes have been on the cards for a while. Last year, minor adjustments were made to the tax bracket – the upper-bound personal income tax rate increased from 40 percent to 45 percent.

South Africa’s Finance Minister Malusi Gigaba. /VCG Photo

Taxpayers whose incomes are above 1.5 million ZAR (127,600 US dollars) felt the sting. And experts say that this year even low income earners could bear the brunt if VAT goes up.

"If you look at the international comparison, the international average is 19 percent, we are sitting at 14 percent. It's sort of at the back track of the average. They will raise the VAT to get the additional income from the VAT system. An increase of one percent in the VAT rate gives a further 25 billion ZAR," said Muneer Hassan, a professor at the University of Johannesburg.

South Africans, already struggling with rising costs, are not happy.

"We need to pay taxes, we understand that. But now, it is killing us. The thing that should be solved first is corruption. If corruption can be solved, even we the people, we need to help the government with corruption,” a Johannesburg resident told CGTN.

Some economists believe there are less painful ways, like cutting back on expenditure.

"If they go and push taxes up, I think it's very problematic… We need to be much more careful on our expenditure," said Glenn Silverman, a consultant at GS Invest.

It will be a tough balancing act for Gigaba. The minister will have to be careful not to impede economic growth by raising taxes too much.