Revenue shortfall expected to rise to R42.8bn
Tax revenue for the 2018/2019 fiscal year is expected to be R15.4bn lower than the forecast made in the medium-term budget policy statement (MTBPS) in October, bringing the total shortfall compared with the 2018 budget to R42.8bn.
The revenue shortfall in the medium-term budget was estimated at R27.4bn.
Finance minister Tito Mboweni said in his budget speech on Wednesday that “approximately half of the increase in the shortfall since October is due to higher-than-expected VAT refunds”.
In terms of the 2019/2020 budget, the revised gross tax revenue for 2018/2019 is R1.3trillion, rising to R1.4-trillion in 2019/2020.
The revenue shortfall reflects a weaker economic outlook, further increases in VAT refunds and problems with tax administration, as highlighted by the Nugent commission of inquiry into the SA Revenue Service (Sars).
“Economic weakness has fed through to lower personal income tax and corporate income tax receipts,” the Budget Review noted.
“Administrative weaknesses in collection were a contributing factor.
“Revenue collection has deteriorated since the MTBPS.”
Corporate income tax is projected to yield R21bn less than the R773bn projected in the 2018/2019 budget; personal income tax R8.4bn less than the R505.8bn projection; VAT R22bn less than the R348bn forecast; and the fuel levy R2bn below the R77.5bn estimate.
The sugared beverages tax is projected to generate R2.3bn in 2019.
Corporate income tax has declined predominantly due to reduced production in mining and quarrying, as well as from the financial sector.
“Job losses, lower wage settlements and reduced bonuses have put pressure on withholding taxes on earnings,” the Treasury noted in the review.
“Domestic VAT performed as expected after the increase in the VAT rate. However, net VAT collections have been considerably lower since October, when Sars accelerated payments of VAT refunds.”
Allegations have been made that Sars, under ex-commissioner Tom Moyane, withheld VAT refunds to boost tax revenues.