Government has once again exceeded its revenue collection target for the financial year that ended on March 31, indicating an improved performance by the South African Revenue Service (SARS).
Finance Minister, Pravin Gordhan, on Sunday announced that SARS officials collected R742.7bn by midnight on Saturday March 31. The figure is R4bn higher than the revenue target set in the February budget and more than R68bn more than was collected in the previous financial year.
The budget deficit of 4.8% estimated in the budget in February also went down to 4.5%. The three main revenue contributors were personal tax, corporate income tax (CIT) and Value Added Tax.
Collections from personal income tax increased from just over R228bn in the 2010/11 financial year to over R251bn this year. Companies tax collections increased to R153.747bn from R134,635bn in 2010/11.
Gordhan noted that although there has been growth of 14.2% year-on-year, CIT remains below the peak of R165.5bn officials managed to collect in the 2008/09 period. Slow recovery
"This slow recovery of CIT in the main accounted for the current tax to GDP ratio which remained flat," he said. Company tax collections also benefited from the stronger imports in the automotive sector coupled by increased investments in capital intensive industries such as energy, manufacturing, and agriculture.
"This is an important indicator of investor confidence in the future of the domestic economy and provides a good platform for future growth," said Gordhan.
Agriculture, mining, and telecommunications contributed over R34bn in taxes combined while banks, insurance, and other financial services were taxed more than R40bn. The manufacturing and petroleum sector contributed over R34bn to the country's revenue.
Officials note that the past three years saw contraction in the construction sector following the boom period leading to the FIFA soccer world cup hosted in South Africa. This also led to a decline in the manufacturing sector where production volumes are said to be recovering moderately.
"The mining, finance, as well as wholesale and retail sectors showed robust growth on the back of a modest economic recovery," read documents from SARS. Economy grows
Gordhan said the country's economy grew by 3.1% and continued to demonstrate resilience in an uncertain global environment. Domestic environment has also been improving with 20 000 jobs created each quarter.
He said given the tough economic climate, SARS had done very well. He was of the view that with more compliance, the revenue service could continue to improve.
"Once again, the SARS has served the people of South Africa very well notwithstanding the challenges that we see in world economy. The vast majority of South Africans pay tax and make contributions to the fiscus by paying VAT, excise duties and the fuel levy on the goods and services they consume," Gordhan said.
Over the past three year period, South Africa has seen an overall revenue growth of more than 4.5% while world markets such as the US and Europe continued to decline.
Although the global crisis was no closer to resolution, buoyant growth in tax revenue in South Africa was driven by the strong performances of import taxes, recovery of cooperate profits and resilient consumption.
Also strong revenue growth benefited from strong contribution from the financial sector which is R18bn or 10% higher than the previous year.