The past financial year has been one of the most challenging periods for South Africa’s economy as the full effects of the global economic downturn constrained growth and led to steep reductions in tax revenue.
From the fourth quarter of 2008, the domestic economy contracted over three successive quarters while revenue expectations were reduced by R69 billion. By midnight last night, the South African Revenue Service (SARS) had collected R598.5 billion in revenue for the financial year 2009/10.
This figure is R8.1 billion more than the revised estimate announced in the February 2010 budget and about R60.8 billion less than the initial printed estimate of February 2009.
The revenue performance confirms that the South African economy is on its way to recovery. In addition to the recovery during the last quarter of 2009, SARS had put in place special measures from August last year which have now paid dividends in compliance. Special revenue raising initiatives by SARS have contributed R23.9 billion in additional revenue for the fiscal year.
The tax to gross domestic product (GDP) ratio with the preliminary outcome of revenue collected has improved from 24.1 percent as at February 2010 to 24.4 percent. Total consolidated government expenditure is provisionally estimated to be R830.5 billion which is R4.8 billion lower than the February 2010 revised estimate. Included in this are debt interest costs which came in R499 million lower than budgeted.
The projected budget deficit therefore narrowed to R166.1 billion or 6.8 percent of GDP from 7.3 percent published in February 2010 which is a further indication that the economy has started to recover. As the recovery continues to take hold, improving revenues will be supportive of our fiscal exist strategy.
Despite the decline in revenue from 2008/09 (R26.8 billion or 4.3 percent less year on year) South Africa’s overall revenue performance since the start of the economic crisis favourably compares with both developed and developing economies.
Over this two years period South Africa has seen overall revenue growth of 4.5 percent. For the same period the United States experienced an overall decline in revenue of 14 percent, New Zealand recorded a 7.8 percent decline, Australia recorded an overall 4.5 percent increase whilst India recorded an 8.1 percent increase.
International experience has shown that times of economic hardship do not only result in lower tax revenues but also adversely affects the levels of compliance amongst taxpayers.
1. Revenue trends
For 2009/10 a gradual improvement in revenue collection began to manifest itself in the final quarter of the fiscal year through improvements in domestic value added tax (VAT) and pay as you earn (PAYE) collections.
Domestic VAT recovery was mainly in the machinery, construction and government sectors.
Consumer spending which accounts for about two thirds of VAT remained subdued. PAYE gains were primarily in the finance, public administration, education and agencies sectors offsetting decreases in the metal sector in which PAYE collections were significantly lower.
Company income tax, secondary tax on companies (STC) and import VAT tax types were severely affected by the economic decline. Coupled with the lag effect, due to the reporting cycle of companies, collections from corporate income tax (CIT) and STC tax types remain depressed. Import VAT, remained subdued and together with the CIT and STC account for an aggregate decrease of R58 billion if compared with the previous year for these tax types.
2. Revenue trends for the various tax types
* Personal income tax (R million)
2008/09: 195.146
February 2009 estimate: 207.450
October 2009 medium term budget policy statement (MTBPS) estimate: 203.500
February 2010 estimate: 203.500
2009/10 preliminary collections: 204.581
Variance to 2008/09: 9.435
Variance (percent): 4.8%
* Company income tax
2008/09: 165.539
February 2009 estimate: 160.000
October 2009 medium term budget policy statement (MTBPS) estimate: 139.000
February 2010 estimate: 130.500
2009/10 preliminary collections: 135.253
Variance to 2008/09: -30.286
Variance percent: -18.3%
* Secondary tax on companies
2008/09: 20.018
February 2009 estimate: 19.000
October 2009 medium term budget policy statement (MTBPS) estimate: 16.900
February 2010 estimate: 16.000
2009/10 preliminary collections: 15.308
Variance to 2008/09: -4.710
Variance percent: -23.5%
* Value added tax
2008/09: 154.343
February 2009 estimate: 168.807
October 2009 medium term budget policy statement (MTBPS) estimate: 138.000
February 2010 estimate: 146.500
2009/10 preliminary collections: 147.977
Variance to 2008/09: -6.367
Variance percent: -4.1%
* Fuel levy
2008/09: 24.884
February 2009 estimate: 30.090
October 2009 medium term budget policy statement (MTBPS) estimate: 28.600
February 2010 estimate: 29.000
2009/10 preliminary collections: 29.138
Variance to 2008/09: 4.254
Variance percent: 17.1%
* Excise duty
2008/09: 20.185
February 2009 estimate: 22.600
October 2009 medium term budget policy statement (MTBPS) estimate: 22.000
February 2010 estimate: 21.000
2009/10 preliminary collections: 21.067
Variance to 2008/09: 883
Variance percent: 4.4%
* Customs duty
2008/09: 22.751
February 2009 estimate: 24.635
October 2009 medium term budget policy statement (MTBPS) estimate: 17.000
February 2010 estimate: 18.500
2009/10 preliminary collections: 19.224
Variance to 2008/09: -3.527
Variance percent: -15.5%
* Other
2008/09: 22.235
February 2009 estimate: 26.722
October 2009 medium term budget policy statement (MTBPS) estimate: 24.525
February 2010 estimate: 25.425
2009/10 preliminary collections: 25.938
Variance to 2008/09: 3.703
Variance percent: 16.7%
* Total
2008/09: 625.100
February 2009 estimate: 659.304
October 2009 medium term budget policy statement (MTBPS) estimate: 589.025
February 2010 estimate: 590.425
2009/10 preliminary collections: 598.486
Variance to 2008/09: -26.614
Variance percent: -4.3%
2.1 Personal income tax (PIT) (including interest)
Despite one million job losses in 2009, year on year growth in PIT of R9.4 billion (4.8 percent) was achieved. The main contributing sectors were finance, public administration, education and agencies. PAYE which contributes to about 94 percent of total PIT collections in the last quarter of the current fiscal year grew by more than R5 billion against the same quarter in the previous year.
Provisional tax for individuals
By end February 2010 provisional tax from individuals increased by R1.9 billion year on year. Of this amount R1.1 billion collected in February 2010 alone.
2.2 Company income tax (including interest)
Provisional tax for companies
Provisional tax from companies is the primary contributor to CIT collections. On a year on year basis provisional tax from companies declined by more than R25 billion of which about R12 billion is attributable to the mining sector alone. The other sectors that were most affected were the financial sector which declined by R14.5 billion and manufacturing which declined by R6.5 billion.
An important trend in company taxes can be distinguished between corporate taxpayers at the SARS large business centre (LBC) and non-LBC companies on a year to year basis. For non-LBC companies, collections in provisional tax improved by more than R2 billion against declines amongst LBC corporate taxpayers.
In the non-LBC category improved year on year collections were achieved in the medical services, machinery and transport, storage and communication sectors. The increased compliance is a direct result of the introduction of the 80 percent payment rule pertaining to the scheduling of provisional payments.
2.3 Secondary tax on companies (STC)
STC was R4.7 billion (23.5 percent) below last year mainly due to lower dividend declarations as a result of lower company profits as well as reduced merger and acquisition activity during the year. Lower collections experienced in the finance, mining and coal and petroleum partially off-set by growth in the transport, storage and communication sector.
2.4 Value added tax
VAT declined on a year on year basis by R6.4 billion mainly as a result of reduced domestic consumption and imports partially offset by lower VAT refunds.
Domestic VAT
In nominal terms domestic VAT was higher than the previous year but in real terms, declined. The sectors that experienced positive growth were the finance, transport, storage and communication, machinery and food drink and tobacco sectors.
VAT refunds
VAT refunds were lower than the previous year as refunds declined in the vehicle, finance, coal and petroleum, agencies and metal sectors on the back of lower exports and production levels.
VAT on imports
VAT on imports was significantly lower than the previous year mainly due to weak consumer spending and declining capital investment. The decline was mainly in the machinery, electrical equipment, vehicles, instruments and mineral fuels chapters.
2.5 Customs duty
Customs duty declined by R3.5 billion (15.5 percent) due to lower imports of vehicles. The percentage contribution of duties declined from 41 percent in 2007/08 to 24.5 percent for the year to date. Other chapters that have declined include electrical equipment, footwear and clothing.
2.6 Fuel levy
Fuel levy collections are higher than the previous year by R4.3 billion (17.1 percent) mainly due to an increase in the levy on fuel, 18 percent on petrol and 21 percent on diesel.
2.7 Specific excise
Specific excise collections were higher than the previous year by R0.9 billion (4.4 percent) mainly due to an increase in rates of 12.9 percent, 14.7 percent and 9.5 percent for cigarettes, spirits and beer respectively.
* Agriculture
R’ million
2007/08: 1.414
2008/09: 2.106
Growth: 692
Percent: 48.9%
2009/10*: 2.406
Growth: 300
Percent: 14.3%
* Mining
2007/08: 13.220
2008/09: 22.370
Growth: 9.150
Percent: 69.2%
2009/10*: 10.033
Growth: -12.337
Percent: -55.2%
* Telecommunication
2007/08: 9.284
2008/09: 8.332
Growth: -952
Percent: -10.3%
2009/10*: 10.142
Growth: 1.810
Percent: 21.7%
* Financial services
2007/08: 41.315
2008/09: 48.129
Growth: 6.814
Percent: 16.5%
2009/10*: 33.661
Growth: -14.468
Percent: -30.1%
* Manufacturing
2007/08: 38.591
2008/09: 44.569
Growth: 5.978
Percent: 15.5%
2009/10*: 38.076
Growth: -6.493
Percent: -14.6%
* Wholesale and retail
2007/08: 12.620
2008/09: 14.717
Growth: 2.097
Percent: 16.6%
2009/10*: 14.085
Growth: -632
Percent: -4.3%
* Business services
2007/08: 12.857
2008/09: 12.042
Growth: -815
Percent: -6.3%
2009/10*: 11.987
Growth: -55
Percent: -0.5%
* Medical and health
2007/08: 1.835
2008/09: 1.914
Growth: 79
Percent: 4.3%
2009/10*: 2.597
Growth: 683
Percent: 35.7%
* Transport
2007/08: 3.760
2008/09: 3.140
Growth: -620
Percent: -16.5%
2009/10*: 2.197
Growth: -943
Percent: -30.0%
* Construction
2007/08: 3.039
2008/09: 4.587
Growth: 1.548
Percent: 50.9%
2009/10*: 5.847
Growth: 1.260
Percent: 27.5%
* Catering and accommodation
2007/08: 1.311
2008/09: 1.435
Growth: 124
Percent: 9.5%
2009/10*: 1.400
Growth: -35
Percent: -2.4%
* Recreation and cultural
2007/08: 1.805
2008/09: 1.812
Growth: 7
Percent: 0.4%
2009/10*: 1.599
Growth: -213
Percent: -11.7%
* Other
2007/08: 585
2008/09: 2.050
Growth: 1.465
Percent: 250.4%
2009/10*: 2.723
Growth: 673
Percent: 32.8%
* Total
2007/08: 141.636
2008/09: 167.203
Growth: 25.567
Percent: 18.1%
2009/10*: 135.253
Growth: -31.950
Percent: -19.1%
Note: *2009/10 preliminary CIT allocations exclude interest on overdue taxes.
For further media enquiries, please contact:
Adrian Lackay
Cell: 083 388 2580
Issued by: National Treasury
1 April 2010
Source: National Treasury (http://www.treasury.gov.za/)
