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SARS welcomes the MTBPS Revenue Announcement

SARS welcomes the MTBPS Revenue Announcement

11 November 2021 – The South African Revenue Service (SARS) welcomes the unflinching commitment made by the Minister of Finance, Mr Enoch Godongwana, to fiscal sustainability, enabling long-term growth by narrowing  the budget deficit and stabilising debt, when he presented the Medium Term Budget Policy Statement (MTBPS) in Parliament today.

The Minister added that a fast-growing economy would allow for greater revenue collection, making it possible for a more comprehensive response to the challenges the country faces.

Incoming domestic and global economic indicators point to improving economic prospects after momentum slowed in recent months. This is amidst persistent supply chain disruptions and continued resurgences of COVID-19.  According to the October World Economic Outlook (WEO) report from the International Monetary Policy (IMF), the global economy is projected to grow by 5.9% in 2021 and 4.9% in 2022, 0.1 percentage point lower for 2021 than in the July forecast.

Domestically, South Africa’s GDP grew by 1.2% in the second quarter of 2021, up from the (revised) figure of 1.0% in the first quarter. It is anticipated that economic performance will pick up in the outer years as the economy is gradually opening up, production levels are strengthening, and trade and consumption demands are improving. National Treasury has revised South Africa’s expected nominal GDP growth for 2021/22 upwards to 10.9%, compared to 8.8% in the February Budget 2021. This represents a significant improvement from a contraction of -2.1% in 2020/21.

In the FY2021/22 tax revenues are expected to grow year on year at 18.9% from the earlier projected growth of 9.2%. This represents tax revenues that are growing a faster rate than the economy, SARS continues to focus on its administrative efficiencies and taxpayer compliance improvement in order to ensure heightened tax revenue collection.

Revenue collections have been trending well above the estimate set out in the February 2021 Budget. This is mainly attributable to the improved economy, endowment effects from previous compliance activities as well as improved collection efforts by SARS. Consequently, the Minister has increased the revenue estimate from R1 365.1 billion to R1 485.4 billion – an increase of R120.3 billion in anticipation of better than expected revenue collections.

Amongst other factors, this revision of the estimate can be ascribed to the improved revenue collected for the year to date period. As at 30 September 2021, SARS collected R720.1 billion, with a year-to-date surplus of R79.1 billion (12.3%) against the February 2021 Budget Estimate. Year-on-year growth over the prior year was recorded at R201.5 billion (38.9%).

All major tax types except for Import Duties and Specific Excise recorded a year-to-date surplus against the estimate. In contribution to the surplus, the major tax types performed as follows against the February 2021 Budget Estimate: PIT Net (6.3%), CIT Net (51.8%) and Net VAT (0.1%). SARS allowed COVID-19 related deferrals on Specific Excise leading to the underperformance during this period, furthermore imports slightly receded leading to customs duties underperformance.

SARS collected R87.0 billion from identifiable compliance activities during the first half of this year. Of this amount, R53.5 billion was collected in cash revenue whilst R33.5 billion was secured through fraud prevention and other leakage protection. This work will intensify as SARS continues to optimise its processes and deepen its effectiveness in order to meet the revised revenue estimate.

The revenue performance at half year reflects an economy that is recovering almost to pre-COVID-19 times. However, there are downside emerging risks that need to be managed for the remainder of the year, including: 1) energy security i.e. load-shedding, 2) resurgence of subsequent waves of COVID-19 domestically and globally, 3) drastic adverse changes in global demand of Ore and PGMs (including exchange rate and commodity price considerations) and 4) supply chain disruption.

SARS will continue on its rebuilding journey towards a SMART, Modern SARS with unquestionable integrity, trusted & admired. Through optimisation of its processes to ensure effective and efficient revenue collection. We are investing substantial resources to modernise our systems thereby augmenting our capability, through leveraging enabling technologies, data analytics and artificial intelligence as well as the use of machine learning algorithms. We believe that these initiatives will help detect and address non-compliance. SARS remains committed to its strategic intent of voluntary compliance.

It is expected that the rate of growth in revenues will outstrip the rate of growth in the economy going into the next 18 months. Therefore, leading to the tax-to-GDP of 24.1% for the year 2021/22.

SARS has facilitated more than R2.6 trillion trade with our trading partners in the past year. As a result, to improve trade facilitation, greater focus and concomitant funding will be crucial going forward in helping us to renew and refurbish ailing infrastructure at our border posts as well as investing in our ICT infrastructure to modernise the Customs landscape towards SMART borders.

SARS Commissioner Edward Kieswetter said: “We remain cautiously optimistic that we will meet the new revenue estimate. SARS is committed to fulfilling its mandate, which is collecting all revenue that is due in order to build a capable state that serves South Africa. This aligns to the Higher Purpose that SARS serves.”

“Executing the SARS mandate would not be possible without the continued compliance of taxpayers, traders, intermediaries and other valued stakeholders, who fulfil their legal obligations and do the right thing. I wish to thank them for complying. Increasingly concerning there are taxpayers and traders who continue to be intentionally and wilfully non-compliant. I call on all these taxpayers, traders and intermediaries to obey the law and meet their legal obligations in order to help build our country which has suffered the shocks of the COVID-19 pandemic and the associated adverse global economic conditions” concluded the Commissioner.


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