Sars tax collection falls short by R14.6bn

“The gross amount collected is R1,575.4bn which was offset by refunds of R287.8bn, resulting in net collections of R1,287.6bn. The net revenue outcome of R1,287.6bn represents a growth of R71.2bn (5.8%) compared to the 2017/18 financial year,” he said.

Seen against the 2019 Budget estimate of R1,345bn, this results in a deficit of R57.4bn (-4.3%), and against the revised estimate of R1,302.2bn, this results in a deficit of R14.6bn (1.1%).

During the financial year, the acting commissioner said gross collections grew by 8.6%, while refunds recorded strong growth of 22.7%. This was following the announcement by the Finance Minister Tito Mboweni during the Medium Term Budget Policy Statement (MTBPS) that the VAT refund envelope would be increased to allow the release of VAT refunds from the fiscus back into the economy.

Hamstrung growth

“During the reporting period, global economic growth weakened to 3.7% for 2018 and a projected growth of 3.5% in 2019. Growth has been hamstrung by US-China trade tensions (and tariff increases) in 2018, the introduction of new automobile fuel emission standards in Germany, the contraction in domestic demand in Italy due to concerns over sovereign and financial risks, as well as weak financial market sentiment and growth in Turkey,” he said.

Measured in real GDP terms, he said, the domestic economy grew by 0.8% in 2018 from 1.4% in 2017. The major contributors to the 0.8% growth rate in 2018 were finance (0.4 of a percentage point based on growth of 1.8%) and government (0.2 of a percentage point based on growth of 1.3%).

On the contrary, agriculture (-4.7% and -0.1 of a percentage point), mining (-1.7% and -0.1 of a percentage point), and construction (-1.2% and -0.0 of a percentage point) contributed negatively to GDP growth in 2018.

Main sources of revenue

He said the main sources of revenue that contributed to the R1.2trn collected were personal income tax (PIT), which contributed R493.8bn (38.3%), value-added tax (VAT) contributing R324.6bn (25.2%), company income tax (CIT), which contributed R214.7bn (16.7%) and customs duties contributed R55.2bn (4.3%).

Pay-as-you-earn (PAYE) collections for the year grew by 7.0% to R477.4bn, despite significant job losses, moderation in wage settlements and contraction in bonus pay-outs. However, this growth was dampened by lower share option pay-outs mainly from the finance sector, moderate public sector annual increases, job losses in the formal non-agricultural sector and lower bonus pay outs in the finance sector.

There was double digit growth in domestic value-added tax (VAT) since May 2019 due to the benefits of the one percentage point increase in the VAT rate. This resulted in strong growth rates in both the large business and SMME segments of 9.8% and 14.8% respectively.

For vendors who paid in both years for the relevant periods, domestic VAT would have grown by 3.9% if there was no VAT rate increase, compared to 11.2% for that sample with the rate hike. That is why significant growth was achieved despite weak growth in retail trade sales, which continue to be under pressure. Full year collections yielded R378.8bn of which 83.0% was received via the eFiling system.

CIT collections contracted by 2.5%, the contraction is on the back of a significant number of CIT refunds which were paid to the large business segment and relate to multiple periods that were under audit review, as well as the continued efforts to clear the IT credit book. Furthermore, the continuing power cuts imposed by the utility company also contributed to the decline as business activities and company operations were severely affected thus affecting their profitability.

Growth in PIT provisional tax payments slowed from 37.5% in August 2018 to 18.4% in February 2019, mainly due to the non-repeat and/or lower declaration of capital gains compared to the previous year.

There was strong growth in import taxes of 14.0% for the first three fiscal quarters, after which transactional data and merchandise imports did not meet expectations during some months of the final fiscal quarter. Payments that are part of the 13th deferment statement exceeded all expectations which resulted in the overall outcome for customs growing at 13.9% which is marginally above the required growth rate.

“As announced at the Medium Term Budget Policy Statement (MTBPS) in October, the requisite fiscal space was created for Sars to reduce the credit book on VAT refunds. Sars reduced the credit book on VAT refunds from R41.8bn in September 2018 to R25bn by the end of the financial year, resulting in a 16.4% increase in value and 6.3% in the volume of refunds going back into the economy,” Kingon said.

The revenue collector said it expected to see gross collections growing at 8.6% while refunds grew by 22.7%.

Sars said it had paid out R287.8bn in refunds in the outgoing financial year.