Sars said the withdrawal rate from the two-pot system is higher than expected.
South African Revenue Service (Sars) Commissioner Edward Kieswetter has warned of lower-than-expected tax revenue collections, which were anticipated earlier this year during the February budget speech.
Kieswetter was responding to Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS) in a special sitting in Parliament on Wednesday.
This is Godongwana’s first budget speech under the new government of national unity (GNU).
Revenue shortfall
The Minister revised the 2024 February Budget net tax revenue estimate downward by R17.6 billion due to an unexpected under-collection of taxes amounting to R22 billion compared to the February 2024 estimates.
Kieswetter told 702 that the lower-than-expected tax revenue has been driven by several economic factors.
He said there was a direct correlation between what happens in the economy and tax revenue collection and shared three biggest factors.
“There is a marked shift from the astonishments on which the February estimates was based and the actually delivery. We are under recovering about R12 billon from individual taxes. When the budget estimate was provided, there was an assumption that the wage bill would grow by 8.4%, whereas actually year to date the wage bill has only grown by 5.4%.
“Therefore 3% is short, lower wages, lower incomes taxes,” Kieswetter said.
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Good and bad news
Kieswetter, however, mentioned there was both good and bad news.
“Eskom is performing better. A lot of rooftop solar have replaced a lot of the traditional diesel generators which has also meant there in a 11% decline in the year on year diesel usage by R1.33 million fewer litres of diesel, and that’s good news because we have reliable electricity.
“But the bad news is that we using less diesel and therefore diesel levies are lower and that’s how its given us a R8.4 billion dent,” Kieswetter said.
Kieswetter further said that during the February budget, there was also an assumption that South Africa’s imports would grow by 1.9%, but the imports have actually decreased by 3.7%.
“That translates through to import VAT being down and customs duties and combined, that has given us a deficit of R15.7 billion. These are the three biggest contributors towards the downward trend.
“To offset that slightly, we’ve had corporate taxes, particularly in the middle to small business areas that have performed better than expected and that has added some positive uplift to the numbers in the projection going forward,” Kieswetter said.
Two-pot system
Kieswetter added that while they do not believe the diesel usage will recover, which affects the fuel levy, there may be some recovery in individual taxes because of delays in wage negotiations, which when settled, will bring some respite.
“If the consumption [diesel] improves, it means that there will be more imports and therefore that will translate through to an uplift in import VAT and customs duties.
“We don’t think at the moment all of this plus the sustained provision of taxes on companies will be enough to replace the year to date shortfall, which is why the minister has settled on a R22 billion shortfall on the February estimate,” Kieswetter said.
Earlier, during a media briefing, Kieswetter responded to a question regarding payouts under the two-pot retirement system, which have amounted to R29 billion.
“The revenue shortfall is R22 billion, and we know that year to date, the two-pot withdrawals have amounted to just over R29 billion, against which R7.2 billion is withheld as tax. But the amount will not be enough to make up for the revenue shortfall.”
Sars confirmed earlier during a question-and-answer session that it has received a total of 1.6 million withdrawal applications from fund administrators to date.
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