The South African Revenue Service (SARS) raised a large amount of revenue exceeding R1.8 trillion for the first time in the fiscal year ending last night at midnight, a significant increase from the R1 540.5 trillion collected the year before.
The tax revenue result of R1.563 trillion represents an increase of 25% or R314 billion over the previous year and a growth of 15.3% over the pre-pandemic year of 2019/20.
Announcing the preliminary revenue outcome, SARS commissioner Edward Kieswetter outlined how far the organization has come since its inception 25 years ago and referred to the rebuilding of the organization which was again reduced by Covid-19 and to the sharp decline in tax revenue collections in 2019/20
“Fortunately we have entered a phase of economic recovery and have regained the momentum to rebuild Sars. We certainly cannot claim an accident-free journey. Over the past three years, despite enormous challenges, SARS has made significant progress in restoring its integrity, credibility and performance. We would be the first to admit, however, that we still have a long way to go. “
Since its formation, SARS has raised more than Rand 17.82 trillion and net tax revenue has grown considerably from Rand 147.3 billion in 1996/97 to over Rand 1.56 trillion in 2020/21 at a rate of compound annual growth of 9.9%.
This is the income collected by Sars
While the estimated revenue at the time of the budget speech in February last year was Rs 1.365 trillion, it was adjusted upward by Rs 120.3 billion to Rs 1.485 trillion in MTBPS 2021 and six weeks ago, the finance minister announced an increase in Revision of a further 61.7 billion rand in his February budget speech from R182 billion to R1.547 trillion.
The main sources of income were
- Personal Income Tax (PIT) contributed R555.8 billion (35.5%), up by R67.3 billion
- Value added tax (VAT) contributed R390.7 billion (25.0%), up by R59.5 billion
- Corporate income tax (CIT) contributed R323.6 billion (20.7%), up by R119.2 billion
- Customs duties contributed R58 billion (3.7%), up by R10.7 billion.
Kieswetter pointed out that the sharp economic contraction in 2020 due to the pandemic was exacerbated by the riots in July last year, which resulted in the economy shrinking by 1.8% in real terms compared to 2019.
Private consumption in 2021 remained 1% below pre-pandemic levels in real terms, while public consumption remained virtually unchanged and public investment declined. Kieswetter said real household consumption growth is expected to rebound to 5.7% in 2021 from -6.5% in 2020 and a moderation to 2.0% is expected in 2022.
Consumers will stick to necessities and non-durable goods, as all income groups are reluctant to buy durable goods.
Contributions to Sars of the economic sectors
Various sectors of the economy have recovered at different levels and also varied from quarter to quarter. The mining industry recorded a strong real recovery of 11.8% and the manufacturing industry of 6.6%, but the construction sector suffered a contraction of 1.9%. Only agriculture, mining and human services exceeded pre-pandemic levels by the fourth quarter of 2021.
Commodity exports of mainly platinum, iron ore, gold and coal dominated the trade, while the country’s imports of mineral products continue to be driven primarily by crude oil. Thanks to growing exports, the trade balance has been in surplus for the past 24 months.
The increase in exports has increased the profitability of entities trading in precious metals and stones, minerals, coal and vehicles. Imports grew 27.2%, contributing to a rise in import taxes above pre-pandemic levels.
Other highlights of Sars
Kieswetter said SARS has seen year-over-year improvement in personal taxpayers reporting 10.4% and 4.2% corporate tax on time. “Our increased focus on revenue collection efforts is paying off. satisfactory. This year I can report that our compliance revenue efforts alone for the financial year 2021/22 have produced a revenue contribution of R209.7 billion. “
The tax-to-GDP ratio also returned to a high of 24.7% compared to the long-term average of 22%.
The High Wealth Individuals segment saw a year-over-year revenue increase of R265m, with overall compliance up 4% year-over-year to 91.78%. “The assets of wealthy people, whether owned directly or indirectly, reflect more on their true tax obligations than on mere regular income,” said Kieswetter.
Early administrative successes include 1.8 million newly registered taxpayers, R7 billion in additional tax payments, over 3 million pending declarations collected, finalizing 1,635 applications for the voluntary disclosure program.
SARS is currently conducting 557 active investigations focusing on the illicit economy worth R42.287 billion. Areas of interest include fuel, tobacco, alcohol, clothing and textiles, leather and footwear. Revenue recovery was Rand 7.73 billion.
Not the revenue for the jam experts say
Economist Mike Schűssler said in response to the announcement that we need to remember that Sars’ record is not the result of our hard work, but is thanks to the commodity boom. “It’s also good news for the rand.”
Prof. Jannie Rossouw, an associate professor at Wits Business School, says rising revenue is good news, but the government needs to use it wisely. “Now we can borrow less and use the extra money to pay off our loans.” She says the extra income will also come in handy to fill the gap left by raising the fuel tax for two months. “Although it appears that SARS is reverting to its old self, I am concerned to hear that it is mistreating taxpayers, such as withholding VAT refunds to make their books look better. SARS should rather go after taxpayers who don’t pay at all.