Tax revenue expected to be R56bn lower than the estimate of a year ago

Tax revenue of R1.73-trillion in 2023/24 is expected to be R56.1bn lower than the 2023 budget forecast due to weak economic conditions, though R700m higher than the estimate contained in the November medium-term budget policy statement.

Load-shedding and logistical constraints have had a dramatic effect on the economy.

Contributing to the decline was the contraction of almost 14% in corporate tax collections over the first 10 months of the financial year relative to the same period the previous year. Corporate tax collections are expected to be R34.8bn lower than the 2023/24 budget.

“Windfall tax gains from high commodity prices over the last two years have come to an end, leading to a sharp fall in mining tax revenue,” the Budget Review states.

“For the first 10 months of 2023/24 mining provisional corporate tax collections fell by R39.2bn, or 50.4%, relative to the same period in 2022/23.

“Lower commodity prices, weaker global growth, increased power cuts and operational problems at SA’s ports have weighed heavily on the sector.”

The Treasury said that while commodity prices were expected to stabilise, corporate profitability was projected to remain weak in 2024/25.

Manufacturing tax collections also contracted, while those from the financial sector registered only marginal growth. Import VAT and customs duties collections slowed considerably. Net VAT collections for 2023/24 have been revised down by R26.1bn from 2023 budget expectations.

Personal income tax collections were R9bn higher than the budget estimate, and tax income from the fuel levy is forecast to be almost R3bn higher, notwithstanding the tax relief provided in 2022. This was due to the increased demand for bulk road transport, the Treasury said.

“Personal income tax collection has remained buoyant as earnings and employment recovered in the wake of the Covid-19 pandemic, with employees’ tax from the finance sector driving strong year-todate growth.”

Specific excise duty collections from cigarettes and tobacco remain well below prepandemic levels, which the Treasury said weighed on overall collections by about R5bn relative to the 2023/24 budget.

Gross tax revenue of R1.863trillion

is forecast for 2024/25, and the Treasury expects revenue to increase by R45.6bn more than the medium-term budget forecast due to the tax proposals in the budget and longer-term reforms under way. Gross tax revenue collections are expected to increase by 7.6%, 6.9% and 7.1% over the next three years, respectively, as economic growth improves.

The tax to GDP ratio is expected to reach 25.3% in 2026/27.