2024 revenue targets overoptimistic, difficult to achieve – IFS

The Institute of Fiscal Studies has said the government’s tradition of over-targeting revenue is worrying.

It said in 2022 and 2023, the government budgeted total revenue and grants to be 20% and 18% of Gross Domestic Product respectively.

The institute noted that apart from 2020 which recorded an outturn of 14.1% of GDP, total revenue and grants have ranged narrowly between 15% and 15.8% of GDP since 2017, despite the various revenue measures outlined in previous budgets.

IFS in its assessment of the 2024 budget, said revenue has never improved beyond 0.4 percentage points of GDP in any year during the period.

“However, in the 2024 Budget, the government has targeted to collect only 16.8% of GDP in total revenue and grants. One would therefore be tempted to argue that the 2024 revenue projection is realistic and thus obtainable. Nevertheless, we still see it to be overoptimistic and difficult to achieve,” it added.

It said for total revenue and grants to GDP ratio to break beyond the upper bound of 15.8% of GDP by a full 1.0 percentage point to 16.8% in 2024, there should be more robust revenue policies supporting it.

“Yet, the 2024 budget’s revenue policies are not much different from what has been pursued in the past, despite the government’s development of the Medium-Term Revenue Strategy, 2024–2027. In fact, the anticipated improvement in revenue in 2024 is based, largely, on revenue measures such as excise tax increases, imposition of a growth and sustainability levy, and some changes that have been made to the income tax act that was introduced in 2023 but whose full effects are expected to be realized in 2024,” it stated.

SSD/NOQ

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