MTBPS: Proposal to improve collection of taxes
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JOHANNESBURG - The government has proposed tax increases of R5billion in the next financial year through the improvement in revenue collection as part of the R40bn tax measures required over the next four years to shore up the fiscus.
Finance Minister Tito Mboweni yesterday tabled the Medium-Term Budget Policy Statement (MTBPS) in Parliament and it showed that the tax revenue shortfall for this year would in fact be worse than was initially projected.
The MTBPS revealed that the South African Revenue Service (Sars) would miss its revenue target by R312.8billion this financial year due to the expected depressed performance of the major tax bases amid Covid-19 financial turmoil.
Sars collected a net amount of R1355.8bn, against the revised estimate of R1358.9bn in the 2019/20 financial year, resulting in a shortfall of R3.1bn.
The Budget documents showed that tax revenue will decline by 17.9percent this year, from R1425.4trillion to R1112.6trln, on subdued gross domestic product (GDP) growth.
The tax-to-GDP ratio is also expected to decline substantially, dropping from 26.3 percent to 22.9 percent.
Mboweni thus revised down South Africa’s gross tax revenue estimate for 2020/21 by R8.7bn compared with the projection in his June special adjustments budget.
“Gross tax revenue is revised down, but this is offset by other receipts into the National Revenue Fund,” Mboweni said.
He, however, steered clear of mentioning the measures of how the Sars would raise the R5bn projected tax increases, especially if there would be any new additional taxes.
Old Mutual chief economist Johann Els said Mboweni had made a clear statement that tax increases were not part of the solution.
“This is very conservative revenue budgeting, providing scope for revenue outperformance,” Els said.
“There was also no mention of extra revenue streams such as the sale of spectrum or potential overshoot of mining taxes.”
The budget showed that tax revenue would increase to R1.5trln, or 25.2percent of GDP, by the end of the medium-term expenditure framework period.
The government suffered major tax reductions as more than 2.2million people lost jobs in the three months to June as a result of the Covid-19 lockdown restrictions.
Another major source of revenue went dry when the government banned the sale of cigarettes and alcohol during the first three months of the lockdown.
The Budget documents pointed to a decline in personal income tax due to the lockdown, weak import outlook, and downward adjustments in specific excise duties as key factors affecting in-year revenue collection.
The Budget Review said though tax revenues had begun to recover after falling sharply, monthly collections remained well below 2019/20 levels in many tax categories.
The domestic value-added tax collected in the first six months of 2020/21, for instance, was 6.7percent lower than in the same period in 2019/20.
The Budget Review indicated that recent tax increases had generated less revenue than expected, and evidence suggested that tax increases can have large negative effects on GDP growth.
Sars commissioner Edward Kieswetter said the organisation would increase enforcement to eliminate syndicated fraud and tax crimes and ensure that outstanding taxpayer returns were filed and liabilities paid among measures they would implement.
“Improved tax collection and administration continues to be an important element in achieving fiscal consolidation, as Sars continues to rebuild its capacity,” Kieswetter said.