01 November 2023– The South African Revenue Service (SARS) welcomes the Medium Term Budget Policy Statement (MTBPS) tabled in Parliament today by the Minister of Finance, Mr Enoch Godongwana, which revised the 2023 February Budget net tax revenue estimate from R1 787.5 billion to R1 730.4 billion.
SARS has continued with its core functions of collecting all that is due to the fiscus. During the first half of the current fiscal year, we have collected gross revenue totalling R1 016.3 billion, growing by 4.5% and recording a surplus of R1.0 billion 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.
This is a good news story and offers hope in a current challenging environment. Through focussed commitment SARS has paid back to the economy through refunds for the first six months of the current fiscal year an amount totalling R212.2 billion, higher by R24.6 billion over the prior year and higher than the Budget 2023 estimate by R30.1 billion.
At R172.1 billion, VAT refund payments contribute 81% to the overall outflows, growing against last year by R21.5 billion. 84% of all VAT Refunds are paid within 21 days, up from 77% last year. However, like all other revenue agencies, impermissible and fraudulent refunds remain a concern in this year, SARS prevented R45 billion from being paid out. Equally important is that we have prevented R45 billion from being paid out following verification activities that were enabled by Artificial Intelligence. Impermissible and fraudulent refunds remain a concern, and we must deal with this phenomenon.
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 R20.5 billion at the back of R118.4 billion total compliance revenue collections, without which the R29.1 billion deficit would have been much larger R49.6 billion.
To date, gross Compliance Revenue yielded R118.4 billion which is R26.0 billion (28.1%) higher than YTD PY. These efforts contributed towards gross VAT (R28.6 billion), gross PIT (R18.4 billion) and gross CIT (R18.9 billion).
Key focus areas includes:
- R11.9 billion from revised assessments flowing from the verification of 1.12 million returns, up Y/Y up by R5 billion (70%).
- Almost R40 billion that was secured from resolving more than 440k debt collection cases, up Y/Y R4 billion (±12%).
- R2.3 billion secured from 121 illicit investigations and 181 state capture cases in progress, 27 cases handed to the NPA.
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 especially the mining sector have 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% from employment and vesting of shares, Community 6.8% from annual salary increases (mainly Government) and Wholesale 6.2% – mainly from retail and vehicles.
Despite encouraging gross revenue collections, net tax revenue performance to date is impacted adversely by several challenges, both domestically and globally. A slowdown in mining production is down 55% 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 is committed to address and limit the impact of key risks on the administration of tax and customs revenue collections such as loadshedding and internal resource constraints. SARS endeavors to continue to expand the tax base and ensure compliance by taxpayers with the view to collect all tax revenue due.
SARS Commissioner said “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”.
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 willfully undermine nation building.
#Your tax matters
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