The South African Revenue Service (SARS) says the country’s fiscal framework would have been under “greater pressure” had it not been for the revenue service’s assistance in collecting money due.
Welcoming the Medium Term Budget Policy Statement (MTBPS) tabled in Parliament on Wednesday – and the revision of the 2023 February Budget net tax revenue estimate from R1,787,5 billion to R1,730,4bn – SARS says the first half of the current fiscal year saw it collecting 4.5 percent more gross revenue than was estimated in the 2023 Budget.
During the first half of the current fiscal year, SARS collected gross revenue totalling R1,016,3bn, a surplus of R1bn against the Budget 2023 estimate.
“This performance is on the back of strong gross collections from VAT, Fuel Levy and PIT- partially offset by lower gross collections from CIT as company profits remain under pressure. Without our assistance, the fiscal framework would have been under greater pressure,” it says.
This is “a good news story” and offers hope in a current challenging environment.
“Through focused commitment” SARS has paid back to the economy, through refunds for the first six months of the current fiscal year, an amount totalling R212,2bn – an amount that is R24,6bn higher than the previous year and R30,1bn higher than the Budget 2023 estimate.
At R172,1bn, VAT refund payments contribute 81 percent to the overall outflows, growing against last year by R21,5bn. Eighty-four percent of all VAT Refunds are paid within 21 days, up from 77 percent last year.
However, like all other revenue agencies, SARS says impermissible and fraudulent refunds remain a concern in this year, and that it prevented R45bn from being paid out. Equally important is that it prevented this amount from being paid out following verification activities that were enabled by Artificial Intelligence.
In addition, it is “encouraging” that SARS’ overall Compliance Revenue collected over the same period made a significant impact that in turn reduced the revenue shortfall by R20,5bn at the back of R118,4bn total compliance revenue collections. Without this, the R29,1bn deficit would have been much larger R49,6bn.
To date, SARS says gross Compliance Revenue yielded R118,4bn which is R26bn (28.1 percent) higher than year-to-date compared to the previous year.
“These efforts contributed towards gross VAT (R28,bn), gross Progressive Income Tax (R18,4bn), and gross Companies Income Tax (R18,9bn).”
Key focus areas include:
- R11,9 billion from revised assessments flowing from the verification of 1,12 million returns, up year-on-year by R5bn (70 percent)
- Almost R40bn was secured from resolving more than 440,000 debt collection cases, up year-on-year by R4bn (approximately 12 percent)
- R2,3bn secured from 121 illicit investigations and 181 state capture cases in progress, with 27 cases handed to the NPA.
SARS says income and profits in the broader economy have been adversely affected from what was anticipated at the 2023 February Budget. Provisional corporate income tax collections from the mining sector especially reduced at the end of the June 2023 and led to a larger-than-expected deficit against the 2023 Budget estimate.
“Nevertheless, higher-than-estimated profitability in the finance sector (amongst others) supported provisional corporate income tax and dividends tax collections. Main sector performance that showed growth includes: Finance - 7.8 percent from employment and vesting of shares; Community - 6.8 percent from annual salary increases (mainly Government); and Wholesale - 6.2 percent, mainly from retail and vehicles.”
Despite encouraging gross revenue collections, however, net tax revenue performance to date is impacted adversely by several challenges, both domestically and globally. Mining production is down 55 percent due to lower demand of coal. This is compounded by disruptions to and under-investment in freight and logistics networks, which erode the competitiveness of the South African economy.
“The intermittent and inadequate electricity supply remains the most immediate and significant constraint to production, investment, and employment. Rising inflation rates constrained household spending by raising the cost of living. Global growth slowed further in recent months. Central banks are countering the effects of high inflation by implementing restrictive monetary policies for longer than anticipated which negatively impact on all developing countries. Several global risks remain, including the increase in geo-political tensions, resulting in the need for stronger domestic demand to support economic growth.”
SARS says it is committed to address and limit the impact of key risks on the administration of tax and customs revenue collections such as load shedding and internal resource constraints, and endeavours to continue to expand the tax base and ensure compliance by taxpayers with the view to collect all tax revenue due.
SARS Commissioner Edward Kieswetter says the historic win by the Springboks on Saturday communicates an important yet simple message – that every single point makes a massive difference between winning and losing.
“While the odds were stacked heavily against the Springboks, it took superhuman efforts individually and collectively to contribute to what at times look like an impossible victory. It is therefore an incumbent upon all of us as South Africans to play by the rules like the Springboks and never give up until the final whistle blows”.
He adds that fiscal citizenship remains a cornerstone of nation building, and voluntary compliance signifies an important social compact between Government and its people.
“SARS remains grateful to all taxpayers who contribute to the greater good of South Africa, and caution those who wilfully undermine nation building.”