Extra billions boost tax haul

Mining helps Sars collect R38bn more than expected

● When SA’s tax year closed at midnight on Wednesday, the South African Revenue Service (Sars) had raked in R38bn more than finance minister Tito Mboweni estimated in his budget.

It was helped by a surge in mining profits, a better-than-expected consumer recovery, and its own efforts to improve compliance.

Sars reported on Thursday that it had collected R1.25-trillion, beating February’s estimate that had been revised upwards from the Treasury’s gloomy predictions in October. Then, revenue had been expected to fall almost R313bn short of February 2020’s preCovid budget estimates. Instead, the shortfall has come in at R175.2bn.

This could mean a consolidated budget deficit of about 12.4% for the 2020/2021 fiscal year. That is down from the 14% pencilled into the budget just six weeks ago, according to Intellidex economist Peter Attard Montalto. It’s unlikely to be “new news” to the market, with the government’s borrowing plans for the coming year already known.

Sars, which reports the tax year-end numbers every year on April 1, is being rebuilt under commissioner Edward Kieswetter after its collections and investigations capacity was devastated by state capture.

Kieswetter said efforts by Sars to improve compliance yielded an additional R158.5bn. It came from more individual taxpayers in the tax net and going after high net worth individuals whose expensive cars and houses belied their suspiciously low tax returns, to tackling “VAT carousels” and customs scams and working with law enforcement on several successful prosecutions.

Kieswetter revealed that the cost to the fiscus of lockdown bans on alcohol and tobacco was R14bn.

The largest boost came from corporate income tax collections. These were almost R12bn higher than February’s estimates, mainly because of the commodity price boom that lifted mining.

Personal income tax collections were R4bn higher and VAT R6bn higher than estimated.

The Sars numbers come in a week of data releases showing a mixed picture.

Confidence levels continue to edge up and SA’s economic recovery continues, though more slowly than in the third quarter, with employment and earnings still well below pre-pandemic levels.

Rating agency S&P estimates that SA’s real GDP will return to its pre-Covid level in the third quarter of 2023, which is worse than any large emerging market other than Argentina.

The Absa/BER purchasing managers’ index rose for a third consecutive month in March to reach 57.4 from 53 in February, but the employment index barely budged.

The quarterly employment survey from Stats SA, which measures formal non-farm employment, showed the economy added 76,000 jobs in the fourth quarter. Many were part-time but employment is still well below pre-pandemic levels and employees’ compensation was down 4.6% year on year.

Though employment recovered to some extent as the economy opened up after the second-quarter hard lockdown, only about 15-million have jobs, down about 1.4-million from pre-pandemic levels, the latest Reserve Bank quarterly bulletin showed.

Household consumer spending in 2020 declined by 5.4% in real terms, reflecting lower employment and earnings as well as uncertainty about the future.

Though consumers remain under pressure, the consumer sector has been more resilient than many expected. Some have benefited from low interest rates and others from government support, and the commodity spillover affected consumers as well, Bank of America strategist John Morris said.

JSE-listed consumer stocks topped the charts last week at Bank of America’s annual investor conference, where Shoprite, Mr Price and Naspers were the top three companies equity investors wanted to meet, followed by Woolworths, Aspen and Bidvest.

The conference attracted more than double the number of investors than last year, with offshore investors, particularly from the US, attending in record numbers.

Bank of America (BofA) head of South African equity research Paul Steegers said there were 166 offshore investors from 87 institutions. A total 376 investors across 126 institutions attended, along with 63 JSE-listed corporates. BofA forecasts earnings across the JSE Alsi could increase 50%, with the recovery going straight to the bottom line because companies have cut costs so much.

S&P said the recovery in emerging markets had been better than expected in the fourth quarter of 2020. In some economies, including SA, consumption was faster than expected.

The rating agencies remain concerned about SA’s rapidly rising government debt and stagnant growth. SA made it into the top 10 on S&P’s latest misery index following the steady decline in its investment ratio, its subpar growth and its “very difficult fiscal predicament, with fiscal flexibility extremely constrained at this point”, S&P said.