Preliminary Outcome of Revenue Collection for the 2013-14 Fiscal Year

SARS 100JOHANNESBURG, 1 April 2014 – The 1st of April is traditionally the day we report our preliminary revenue outcome within twelve hours after the close of the fiscal year at midnight on the 31st of March.

The February 2014 Budget sets SARS a revenue target of R899 billion.

For the 2013/14 fiscal year which ended at midnight—

  • SARS collected R899.7 billion which is R0.7 billion above the revised estimate in the 2014 Budget.
  • Tax revenues grew and exceeded the previous year’s revenue collections of R814.1 billion by R85.7 billion
  • Nominal GDP growth for 2013 remained subdued at 8.3% but tax revenue grew by 10.5%

The 2013/14 target was adjusted upwards by R1 billion from the original printed estimate in the 2013 Budget. In the October 2013 MTBPS the target was revised downwards to R895 billion as growth in both the global economy and domestic GDP slowed, particularly during the third quarter of 2013.

The fiscal impact of the above is:

  • Preliminary expenditure estimates combined with the good revenue performance, imply a consolidated deficit at or slightly below the 4% of GDP for the 2013/14 fiscal year as anticipated in the 2014 Budget.
  • Preliminary expenditure numbers for March 2014 will be made available at the end of the month. National Treasury anticipates expenditure outcomes to be slightly below the R1.1 trillion announced in the last budget.
  • The 2014 Budget projects that spending will be well contained over the medium term, and government remains committed to an expenditure ceiling.  Given this commitment, the buoyant revenue will contribute to our efforts at fiscal consolidation.

The three main revenue contributors for 2013/14 were—

  • Personal Income Tax (PIT): total collections were R310.5 billion which were R778 million (0.3%) above the Revised Estimate in the 2014 Budget of R309.7 billion. This is 33.8 billion (12.2%) higher than the R276.7 billion outcome of the previous financial year
  • Corporate Income Tax (CIT): total collections were R179.9 billion. This is R1.2 billion (0.7%) above the Revised Estimate in the 2014 Budget of R178.7 billion. This is R19 billion (11.8%) higher than the R160.9 billion outcome of the previous financial year
  • Value Added Tax (VAT): total VAT collections were R237.7 billion. This is R1.6 billion (-0.7%) lower than the Revised Estimate in the 2014 Budget of R239.3 billion. This is R22.7 billion (10.6%) higher than the R215 billion outcome of the previous financial year.

The collection of R899.7 billion increases the tax-to-GDP ratio from 25.9% anticipated in the 2014 Budget to 26%. This improvement is still below the 27.6% of GDP in 2007/08. Because of the global financial crisis the tax-to-GDP ratio declined to 24.4 in 2009/10.

I want to thank every registered taxpayer who paid their fair share of tax during this tax year and who did so on time.

Drivers of revenue—

  • Both the mining and manufacturing sectors grew at double-digit rates in the fourth quarter of 2013 after lacklustre performances earlier in the year.
  • Above-inflation wage settlements have sustained personal income tax (PIT).
  • Strong imports have advanced customs revenue.
  • The factors driving revenue buoyancy in 2013/14 are not expected to persist, with revenue growth tracking GDP more closely over the medium term.
  • Considerable investment in curtailing fraudulent VAT claims saw progress in cleaning up of the VAT register and improved risk profiling.
  • The depreciation of the Rand – losing 17.5% of its value against the U.S. dollar in 2013 – improved trade-related taxes and Corporate Income Tax (CIT) of companies with offshore earnings. The slow recovery of CIT following the 2009 recession, accelerated this year because of higher export earnings.
  • Sustaining tax compliance: improved collections from medium-sized companies and improved Provisional tax payments by individual taxpayers earning income from sources other than salaries.
  • SARS is a full participant in global forums that promote the exchange of information and the enhancement of transparency. Opportunities for corporates that were exploiting tax loopholes and operated on the fringes of good fiscal citizenship are being closed.
  • The moderation in household consumption expenditure, which accounts for 61% of GDP, as a result of muted consumer confidence, slow employment creation and high levels of household debt placed indirect taxes – domestic VAT and Excise taxes – under pressure.

Tax collection remains buoyant. Future performance will depend on economic factors such as growth, investment, household consumption and risks from the global environment. Tax collection is likely to track GDP growth more closely in the years ahead.

SARS will continue to build on progress over the last twenty years to improve levels of tax compliance.

Taxation in Twenty Years of Democracy

South Africa’s tax system is an essential part of the foundation of the country’s public finances. Twenty years of democracy have brought enduring achievements for South Africa.

Tax Revenue increased from R113.8 billion in 1994 to R899.7 billion for the last fiscal year:

  • The number of registered taxpayers was 1.7 million in 1994 and now exceeds 13.7 million
  • A significant change in the tax policy framework in the early 2000s
  • The Corporate Income Tax rate reduced from 40% to 28%
  • The top marginal rate for Personal Income Tax was reduced from 45% to 40%
  • Total Personal Income Tax relief amounted to R139 billion over this period

Over two decades—

  • South Africa has built a progressive tax system
  • Our tax policy framework has proven to be resilient during the global economic turmoil that have tested South Africa’s public finances, its economic policy framework and its regulatory environment over the past five years.
  • Improvements in the management of public finances
  • The revenue authority was transformed and the tax base was broadened
  • From 1997 a three year budget framework was introduced, enabling government to link budgeting choices more effectively with public policy objectives.
    The strength of our government finances is well illustrated by our past performance, including what we are announcing today. We have proven our ability to take tough decisions to promote service delivery while safe-guarding fiscal sustainability. We are leaving the next administration with a solid foundation – resilient revenue collection system and an effective approach to expenditure management.