Cape Town – Revenue collection is projected to decrease by approximately R56 billion compared to the 2023 Budget forecasts, according to the National Treasury Medium Term Budget Policy Statement (MTBPS).
This decline is attributed to several factors, including slowing commodity exports, slower economic growth, downward revisions in tax base growth, reduced corporate tax collections, and lower net value-added tax (VAT) collections.
The 2023 Budget initially projected revenue collections of around R1.78 trillion but has been revised down to R1.73 trillion.
“In recent years, revenue collection has benefited from a pattern of high prices for South Africa’s commodity exports. In the current year, commodity prices have fallen faster than expected and value‐added tax (VAT) refund claims have risen, resulting in revenue collections projected to be R56.8 billion below 2023 Budget estimates.
“The moderate revenue outlook is limited by the domestic economic outlook and negative shifts in the global economy,” the department said.
This as Minister of Finance Enoch Godongwana tabled the Medium Term Budget Policy Statement in Parliament on Wednesday.
Key factors impacting revenue collection in the first half of 2023/24 include significantly reduced profitability in the mining sector, which led to a substantial drop in corporate tax collections.
VAT refund payments have also increased due to stronger exports, higher investments in embedded generation, and increased business costs. However, stronger personal income tax collections have been driven by a sustained recovery in earnings and higher bonus payments, particularly in the finance sector.
The tax-to-GDP ratio is expected to decline from 25.1 percent in 2022/23 to 24.7 percent in 2023/24. To address fiscal challenges, the Minister of Finance plans to propose tax measures to raise an additional R15 billion in 2024/25.
Despite this, revenue collection is projected to fall short of 2023 Budget estimates by R121.4 billion between 2024/25 and 2025/26, with tax buoyancies expected to remain lower over the medium term.
Treasury emphasises that improving economic growth and enhancing tax administration are essential for boosting tax revenues.
The decline in commodity prices has impacted windfall tax receipts, and under-collections in corporate income tax receipts are expected to continue.
While the tax-to-GDP ratio remains relatively resilient, South Africa needs stronger economic growth and improved tax administration to enhance tax revenues over the medium to long term.
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Compiled by Betha Madhomu
