Although the South African Revenue Service (Sars) announced in its preliminary revenue results outcome today that it collected more tax over the past year in spite of the pandemic, Sars commissioner Edward Kieswetter said he cannot declare victory as there is still much to do.
The various alcohol bans as well as the tobacco ban at the beginning of lockdown saw Sars lose R14 billion in revenue. At the same time Sars found that South Africans have more than R400 billion in offshore bank accounts.
“The lifestyle of wealthy people says more about their true income than what they declare,” Kieswetter said.
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Tax collected
Sars collected a gross amount of R1,541.1 billion for the period ending 31 March 2021. This amount was offset by refunds of R290.9 billion, resulting in net collections of R 1,250.2 billion. This is higher than the revised estimate in the Budget 2021 of R1,212.2 billion that represented a contraction of R105.6 billion (down 7.8%), compared to the previous financial year.
Kieswetter said the 2021 Budget printed estimate for 20201-22 was set at R1,365.1 billion, representing growth of 12.6% against the revised estimate (RE) for 2020-21 of R1,212.2 billion. These are preliminary results that must still go through detailed financial reconciliation and a final audit.
This estimate is underpinned by main assumptions that include nominal growth in gross domestic product (GDP) of 8.8%, with a tax-to-GDP extraction ratio of 25.5%. Compared to the preliminary 2020-21 collections of R1,250.2 billion, the 2021-22 estimate of R1,365.1 billion represents growth of R114.9 billion (9.2%).
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Tax administrative actions during the period under review saw Sars collect R158.5 billion, with close to R94.1 billion in additional cash collections and the remaining R64.3 billion being non-cash collections.
Better than expected
Kieswetter said a rebound in economic activities after the easing of lockdown resulted in better than expected tax revenue collections, with corporate collections recovering in the last quarter of 2020, driven mainly by higher international commodity prices.
“Pay As You Earn (PAYE) collections continue to be challenged by sluggish employment and wage growth, as well as lower bonus payments. Despite seeing a contraction in domestic VAT liabilities during the first fiscal quarter, early signs of recovery were noted from July onwards.”
He said although the adjusted lockdown level 3 during December 2020 caused a contraction in domestic VAT liabilities for February, it was short-lived as domestic VAT collections bounced back in March, with month-on-month growth of 8.5%. The full reporting period saw a contraction in both the volume (7.1%) and value of domestic VAT liabilities (2.3%).
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The main sources of revenue that contributed to the R1,250.2 billion collected were:
- Net personal income tax (PIT), which contributed R488.6 billion (39.1%)
- Net VAT, contributing R330.7 billion ( 26.5%)
- Net company income tax (CIT), which contributed R204.7 billion (16.4%)
- Customs duties, which contributed R47.4 billion (3.8%).
Revised estimate
The major contributors to the surplus against the 2021 Budget revised estimate were:
- Net PIT collections, including interest on overdue taxes, were R4.2 billion (0.9%) higher than the RE, mainly due to higher PAYE and PIT provisional payments offset by higher refunds
- PIT provisional payments were R1.7 billion (6.8%) higher than the RE
- PAYE were higher than the RE by R6.5 billion (1.3%) offset by higher than expected PIT refunds of R2.7 billion (8.3%)
- Net CIT collections, including interest on overdue taxes, were R204.7 billion, yielding a positive performance of R12.5 billion (6.5%) against the RE
- CIT refunds were also lower than expected by R0.9 billion (4.0%) against the RE due to lower CIT refunds paid out to the large business segment, particularly in mining
- Domestic VAT was R2.5 billion (0.6%) above the RE
- DT/STC collections were R24.7 billion, a slight increase of 7.6% against the RE
- Import VAT exceeded the RE by R11.8 billion (7.7%), but collections were R13.9 billion (7.7%) less than the previous year, mainly due to declining growth rates from the largest commodity drivers of the tax
- Customs duties exceeded the RE by R2.2 billion (4.9%), but collections were R8 billion (14.4%) less than the previous year, mainly due to declining growth rates from the largest commodity drivers of the tax
- Specific excise duty collections were R7.6 billion (30.7%) higher than the RE, mainly due to higher cigarette and wine sales, but R14.6 billion (-31.1%) less than the year before
- Fuel levies were slightly (0.03%) higher than the RE, but R4.9 billion (-6.1%) less than the year before, mainly due to local manufacturers selling less fuel
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Large and international businesses
Large and international businesses (LB&I) contributed R378.4 billion (30.3%) to SARS collections, with a contraction of R23.0 billion (5.7%) compared to the year before. The two key pillars that assisted the performance of these revenue collections were the focused efforts to improve compliance, with a rapid response to non-compliance and continuous or regular discussion with key taxpayers on direction of their businesses.
Main drivers
Kieswetter said the extraordinary pandemic circumstances changed the economic landscape and the way Sars operates to collect the tax revenue due. “The main drivers of the reported revenue are the impact of renewed tax administrative efforts to improve taxpayer compliance, domestic and global constraints on economic activities and the related tax relief measures implemented in lieu of the Covid-19 pandemic restrictions.”
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He said the newly instituted organisational and operational rearrangements, as part of Sars Vision 2024, enabled the cascading of the management of taxpayers’ accounts to nine regions and three segments, while the re-establishment of the large and international business unit was further entrenched and made operational, in both instances leading to improved focus on revenue and taxpayer service.
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