the preliminary revenue results for the fiscal year 2005/06
3 April 2006
Pretoria - I am pleased to announce that the South African Revenue Service
(SARS) has, by midnight on Friday, 31 March 2006, collected R418.116
billion.
This is more than R1 billion above the revised 2006 budget estimate of R417
billion and R45.3 billion more than the original printed estimate of R372.8
billion.
This is an extraordinary effort in the face of a formidable target in an
optimistic but changing economic environment. This surpasses all previous
performances by SARS.
In his State of the Nation address to Parliament in February this year,
President Thabo Mbeki reminded South Africans that this country has entered its
âage of hope.â The preliminary revenue result we announce today gives further
credence and justification to the mood of optimism and confidence in the
country and our ability to fund our ambition for a better life for all South
Africans.
The collection of revenue is a key enabler of governmentâs programme of
action to invest in infrastructure, provide more basic services and build our
human capability. By contributing R45.3 billion more than we had originally
estimated, South Africaâs taxpayers provided the impetus for accelerated
delivery and growth while at the same time paving the way for the significant
tax relief I announced in February.
This revenue performance is a credit to all South Africans in particular the
growing number of tax compliant fiscal citizens who contribute their fair share
to the growth and development of our country. The government of South Africa
thanks you!
We also want to thank our corporate taxpayers who contributed about two
thirds of the R16 billion that was collected on the last day of the financial
year.
The initial target of R372.8 billion was based on a set of macroeconomic
assumptions that changed significantly for the better during 2005. The actual
performance of the economy turned out to be better than these assumptions. One
of the consequential benefits was an acceleration of commercial activity on the
supply of goods and services on the back of an increased consumption demand.
This resulted in an increase in gross domestic product, imports, gross
operating surpluses and gross domestic expenditure over this period. In
addition, corporate income which slowed down for a substantial part of 2004 and
started to accelerate when the initial estimates for 2005/06 were made, grew
strongly during 2005.
On the other hand incomes for individuals were subject to different dynamics
resulting in lower collection of personal income tax. The revenue outcome for
2005/06 is a fair reflection of current economic conditions as well as
improvements in tax administration.
The revenue target was adjusted twice during the financial year in the
October Medium Term Budget Policy Statement (MTBPS) and in the budget on 15
February this year. The upward adjustments of the revenue target again tested
the capabilities of SARS.
The 15 000 SARS employees continue to serve the people of South Africa with
pride and passion. Among them we must recognise the efforts of customs
officials who work under difficult conditions at the border posts of this
country.
South Africa and its people are now reaping the rewards of an upbeat
economy, improved tax compliance and civic responsibility and a steadily
improving tax and customs administration.
Specific highlights of this yearâs revenue collections are:
1. Personal income tax (including interest)
R125,4 billion was collected, which is below the February 2006 estimate of
R126,46 billion. The February 2005 estimate was R117,64 billion. The South
African Reserve Bank quarterly bulletin stated that the rate of increase in the
compensation of employees slowed from 9.43 percent in 2004 to 8.89 percent in
2005 and the lower collection amount must be viewed within this context.
2. Value added tax
R114,96 billion was collected. This is in line with the February 2006
estimate of R115,0 billion and R8,99 billion above the February 2005 estimate
of R105,98 billion.
The increased collection was driven mainly by the growth in real household
expenditure, which was seven percent in 2005 compared to an increase of 6.5
percent in 2004. This was the highest annual growth rate in real consumption
expenditure by households since 1981.
3. Corporate income tax (including interest)
R88,79 billion was collected. Corporate income tax once again performed much
better than expected. This is R2,87 billion above the February 2006 estimate of
R85,92 billion. The February 2005 estimate was R69,62 billion.
The better performance is a result of continued strong economic growth and a
more comprehensive approach by the large business centre of SARS to improve
corporate compliance.
Growth in gross operating surpluses of business enterprises increased by
8.73 percent in 2005 versus 8.28 percent in 2004 and the better performance is
mainly in the following sectors:
* Financial services
* Insurance
* Telecommunication
* Wholesale and retail trade
* Construction
* Real estate and business services
The efforts of SARS officials to ensure that provisional corporate tax
payments reflected the latest profit positions (application of paragraph 19(3),
yielded R12,5 billion in 2005/06 versus R7.3 billion in 2004/05. This involved
both better and proactive relationship management between SARS and some
corporates and where necessary the application of the paragraph 19(3) of the
Income Tax Act. In addition specific tracking and active follow ups of large
payments ensured the timeous payments of taxes due. Regrettably many companies
still under declare their provisional income tax payments.
A number of large companies that were not expected to make any contribution
have come out of an assessed loss position during this year contributing a
further R1,6 billion.
SARS has proactively detected and successfully challenged a number of
aggressive tax avoidance schemes. This resulted in a further R1 billion.
Examples of the typical practices includes the incorrect allocation of revenue
expenditure to capital accounts, the abuse of share allocation schemes, the
inappropriate use of international tax structures as well as aggressive loan
financing structures.
4. Secondary tax companies
R12,26 billion was collected which is R414 million above the February 2006
estimate of R11,85 billion. The February 2005 estimate was R8,7 billion.
The increase from the printed February 2005 estimate to the February 2006
estimate is due to corporations declaring sizable increases in dividends. The
growth in dividends declared in 2005 was 17.46 percent which is double the
growth in company gross operating surpluses of 8.73 percent in 2005.
Special collection efforts by SARS contributed approximately R263 million to
the total amount collected.
5. Transfer duties
R8,51 billion was collected which is R191 million below the February 2006
estimate of R8,7 billion. The February 2005 estimate was R7,95 billion.
Although turnover in the real estate market remained brisk in 2005, the
growth in activity slowed from the previous year. The impact of the reduced
transfer duty rate effective from March 2006 was not substantial in the March
collections.
6. Excise duties and ad-valorem
R15,72 billion was collected which is close to the February 2006 estimate of
R15,8 billion. The February 2005 estimate was R15,7 billion.
7. Fuel levy
R20,49 billion was collected which is R209 million below the February 2006
estimate. The February 2005 estimate was R20,65 billion.
Fuel levy collections were down by R893 million but was reduced by a payment
of R584 million received from the road accident fund on debt owing.
Approximately R458 million is still unpaid for which funds have already been
appropriated to the road accident fund.
Special compliance actions contributed R304 million to the total amount
collected.
8. Marketable securities tax
R1,97 billion was collected which is R173 million above the February 2006
estimate of R1,8 billion. The February 2005 estimate was R1,3 billion.
The increase in the amount collected compared to 2005 was underpinned by the
continued buoyancy in the stock market.
9. Customs duties
R18,41 billion was collected which is R192 million below the February 2006
estimate of R18,6 billion. The February 2005 estimate was R13,0 billion.
Merchandise imports nevertheless rose by 11.5 percent in 2005.
The slower growth in domestic expenditure (Gross domestic expenditure slowed
from 7.5 percent in the third quarter of 2005 to four percent in the fourth
quarter of 2005) coincided with a contraction of about 1.5 percent in the
volume of merchandise imports. (Source: South African Reserve Bank quarterly
bulletin)
The allocation per tax type is based on preliminary information, and
re-allocations could still occur with the release of the final figures.
For further enquiries contact:
Adrian Lackay
SARS Communications
Tel: (012) 422 4206
Cell: 083 388 2580
Issued by: South African Revenue Service
3 April 2006
