Revenue from tax collection in 2024/25 is expected to be down by R22.3 billion from National Treasury’s estimations made in February this year.
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This according to Finance Minister Enoch Godongwana who delivered the Medium Term Budget Policy Statement (MTBPS) speech in Parliament on Wednesday.
Tax revenue remains under pressure
“Over the next two years, the main budget revenue estimate has also been lowered by R31.2 billion. In the absence of faster growth and in the face of external risks, tax revenue will remain under pressure, forcing us to make difficult decisions on where to spend.
“Lower revenue also means that we cannot, within the envelope, accommodate all of the demands on the fiscus. Difficult trade-offs, in all spheres of government, will have to be made.
“By sticking to our debt-reducing strategy and confronting these trade-offs, we can create the necessary conditions for a fast-growing economy that facilitates employment,” he said.
In the expanded MTBPS, National Treasury said it projects that SARS will collect some R2.3 trillion in tax by 2027/28.
“The tax-to-GDP [gross domestic product] ratio remains resilient and tax collections are expected to remain buoyant over the medium term. Tax revenues are projected to increase to R2.3 trillion, or 24.8% of GDP by 2027/28. Tax buoyancy increases to average 1.08 over the medium term, up from 0.95 in the current year,” the MTBPs stated.
Despite this, revenue collection is expected to decrease over the next few years.
Improved profitability outlook
“However, compared with the estimates set out in the 2024 Budget Review, which reflected a high level of energy imports, gross revenue collection is projected to fall short by R41.4 billion in 2025/26 and 2026/27. Improved tax revenues will require more sustainable economic growth and further gains in tax compliance and tax administration,” Treasury said.
Due to improved profitability outlook, the department said it expects corporate tax collections to rise over the next few years.
“However, slower renewable energy related imports associated with stabilising power supply have weakened import growth, resulting in lower import VAT collections.
“Together with continued strong growth in VAT refund payments, net VAT collections are projected to fall short of 2024 Budget estimates. Under-collections in fuel levy receipts relative to 2024 Budget estimates flow through to the outer years,” the MTBPS said.
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