The Minister of Finance, Enoch Godongwana, said yesterday that the collection of revenue this year was lower relative to the 2023 Budget, citing under‐collections in corporate tax, particularly from the mining sector.
The gross tax revenue estimate for 2023/24 has been revised down by R56.8 billion to R1.73 trillion. This reflects lower revenue performance, higher wage bill costs and higher projected debt-service costs.
“The main reasons for this are a sharp fall in corporate income tax, particularly from the mining sector.
“The result of the shortfall is a substantial worsening in the main budget deficit in the current fiscal year. We are now projecting a deficit of 4.9% of GDP (gross domestic product) compared to our previous estimate of 4%,” he said.
Godongwana said under these circumstances, measures to stabilise public finances and reform the economy to generate higher growth were essential.
However, personal income tax collections were marginally better than expected due to near‐term gains. Personal income tax is expected to surpass the budget forecast of R640.3bn by R6.4bn due to the recovery in earnings and higher bonus payments, with employee tax from the finance sector a strong driver of year-to-date growth.
“The sharp contraction in commodity prices now under way suggests that the windfall tax receipts that South Africa enjoyed in recent years have come to an end.
“Under‐collections in corporate income tax receipts relative to 2023 Budget estimates flow through to the outer years. Stronger VAT refund payments over the medium-term partly reflect higher renewable energy investments and responses to structural constraints in logistics and fuel refinery capacity,” the department said.
“Non‐tax revenue estimates for the next two years have also been reduced by R24.4bn due to lower mineral and petroleum royalties and departmental receipts.
Godongwana said the South African Revenue Services (Sars) would continue its focus on enforcing compliance in areas such as debt collection, fraud prevention, curbing illicit trade, voluntary disclosures, and encouraging honest taxpayers to comply voluntarily.
“Every additional rand of revenue collected is one rand less which we have to borrow,” he said.
Meanwhile, Sars said yesterday it welcomed the Medium-Term Budget Policy Statement.
Sars said gross revenue collections remained encouraging during the first half of the current fiscal year despite an uneven economic recovery.
"Sars is proud to report gross collections totalling R1 016.4bn, growing by 4.5% and recording a surplus of R1.0bn against the Budget 2023 estimate.
"This performance is on the back of strong gross collections worth R14.7bn from VAT, R7.0bn from the fuel levy, and R4.9bn from individual taxes -- partially offset by R17.7bn lower gross collections from CIT (corporate income tax). This is as company profits remain under pressure. Further, smaller shortfalls were recorded for dividend tax (R2.6bn), specific excise (R2.5bn), and import duties (R0.4bn)," Sars said.
Sars said the good news story was that it released R212.2bn in refund payments back to the economy during the first six months of the current fiscal year.
"These payments are higher than the prior year by R24.6bn (13.1%) and also higher than the Budget 2023 estimate by R30.1bn.
"At R172.1bn, VAT refund payments contributed 81% to the overall outflows, growing against last year by R21.5bn.
“Noteworthy, is that 84% of all VAT refunds are paid within 21 days, up from 77% last year. However, like all other revenue agencies, impermissible/fraudulent refunds remain a concern, and this year, Sars prevented R45 billion from being paid out through Artificial Intelligence Compliance Activities," it said.