Author: Matthew le Cordeur
Slow economic growth and a steep decline in commodity prices resulted in R7.6bn less tax being collected in 2015/16, Finance Minister Nhlanhla Nene said in his mini budget on Wednesday.
In total, lower growth has resulted in a downward revision of R35bn to gross tax revenue between 2015/16 and 2017/18.
The tax revenue outcome for 2014/15 was R986bn, a 9.6% increase on collections in 2013/14 and R7.3bn higher than the 2015 budget target, led by strong growth in personal income tax (PIT).
Overall, gross tax revenue has been revised downward by R7.6bn in 2015/16, R14.6bn in 2016/17 and R12.4bn in 2017/18 compared with the projections tabled in the 2015 budget.
South Africa’s economy retracted by 1.3% in the second quarter and the rand fell to its lowest since 2011 because of electricity constraints, low productivity and poor performance in emerging markets.
Corporate income tax
“Revenue has nonetheless held up well since the 2008/2009 recession,” he said. “This signals both the resilience of our tax policy framework and continued strength of tax administration.”
Factors contributing to the increase included moderate relief for the effects of inflation, high growth in public-sector compensation and fairly high private-sector wage settlements, Treasury said in its mini budget.
Non-tax revenue in 2015/16 is expected to be R28.9bn higher than the 2015 Budget estimate. This is attributed to the R25.4bn sale of Vodacom shares and higher receipts from other financial transactions. Treasury allocated R2bn as a contribution to the Brics New Development Bank and R23bn to Eskom from that Vodacom sale.
Above-inflation wage settlements have supported high buoyancy in PIT collection in recent years, said Treasury. The under-collection of corporate income tax in the current year is mainly due to contractions in the mining and manufacturing sectors on the back of poor global demand, lower commodity prices and domestic electricity constraints, it explained.
The increases in income tax rates and the fuel levy announced in the 2015 Budget will help sustain revenue collection over the medium term, Treasury said.
Growth in corporate income tax receipts, however, is expected to remain subdued through 2016/17. The technical annexure includes key assumptions underpinning the medium-term revenue forecast.