Gross tax revenue estimate revised down by R8.7 billion

Finance Minister Tito Mboweni said in the supplementary budget in June that National Treasury expected to miss its tax revenue target by over R300 billion this year.

The gross tax revenue estimate for 2020/21 has been revised down by R8.7 billion compared with the projection in the June Special Adjustments Budget, National Treasury said on Wednesday. 

Finance Minister Tito Mboweni said in the supplementary budget in June that National Treasury expected to miss its tax revenue target by over R300 billion this year. 

“This deterioration is aligned with revised economic growth projections and the expected performance of the major tax bases. 

“Gross tax revenue is expected to be 17.9% lower than collections in 2019/20, or R312.8 billion below the 2020 Budget forecast. 

“The tax-to-GDP ratio is expected to decline substantially, dropping from 26.3% to 22.9%. 

“A strong and sustained rebound in economic growth is required for the tax-to-GDP ratio to return to levels seen in 2019/20,” National Treasury said. 

Tax revenues, which fell sharply during the first several months of the Coronavirus pandemic, have begun to recover. 

However, Treasury said monthly collections remain well below 2019/20 levels in many tax categories. 

“For example, domestic value-added tax (VAT) collected in the first six months of 2020/21 was 6.7% lower than the same period in 2019/20.” 

Treasury said key factors affecting in-year revenue collection include:

• A significant decline in compensation, and therefore personal income tax, due to the lockdown.

• A weaker import outlook, which has reduced VAT and customs expectations.

• A sharp reduction in consumption, lowering domestic VAT collection.

• Downward adjustments in specific excise duties associated with a longer-than-expected tobacco ban.

• Stronger-than-expected corporate profitability, limiting the anticipated reduction in corporate income tax and dividend tax receipts.

(With Inputs from South African Government Press Release)