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Tax revenue points to growing economy

All eyes on Gordhan ahead of Budget

Finance Minister Pravin Gordhan is congratulated by his predecessor, National Planning Minister Trevor Manuel, after delivering his Budget speech in Parliament, Cape Town, 23 February 2011 (Photo: The Presidency)

10 April 2011

The South African Revenue Service (Sars) collected R647.2-billion in tax revenue in 2010/11, R2-billion more than was targeted in the 2011 budget, Finance Minister Pravin Gordhan said in Pretoria on 1 April.

"Positive economic growth over successive quarters in 2010 and a modest recovery in revenue indicate that our economy is regaining its growth momentum," Gordhan said of the preliminary outcome of revenue collection for the 2010/11 fiscal year, adding that he expected tax revenues to continue improving.

The figure represents nominal growth in revenue of 12.6% over the previous fiscal year.

"The preliminary spending outcome of R891.3-billion is 0.2% of GDP lower than anticipated in the 2011 budget. Combined with higher than anticipated revenue, the preliminary budget deficit is 5% of GDP 0.3% lower than in the 2011 budget," he said.

Positive signs going forward

In the case of personal income tax, the year-on-year growth of R21.8-billion was driven by wage settlements that were in excess of inflation with wage settlements estimated at 8.2% in 2010 as opposed to 2009's 9.3%.

The main factors in improved growth were attributable to growth in the finance, public administration and agencies sectors. However, put against the revised 2011 budget, personal income tax was lower by R1.1-billion.

Corporate income tax collections declined by R1.5-billion, though positive signs going forward included recovery in demand, commodity prices, as well as overall growth in gross operating surplus indicating improvements in business profitability.

"There are healthy signs," Gordhan said.

Value Added Tax (VAT) collection at R184.2-billion showed an improvement of R36.2-billion, while on refunds, the revenue service has introduced stricter validation rules in order to eliminate the abuse of refunds. Refunds in 2010 were R5-billion below the revised estimate.

Focus on high income earners

Sars expressed concern at the level of compliance among particularly high income earners, having identified about 2 800 people who meet the criteria of high income earners.

These individuals, said Sars Commissioner Oupa Magashula, would receive greater scrutiny in the coming year: "During the next financial year, Sars will therefore be focusing its attention on the 200 most non-compliant high net worth individuals."

The Sars Large Business Centre investigated 14 270 large corporate and non corporate taxpayers for underpayments of provisional tax, resulting in revenue of R4.9-billion.

The revenue target for 2011/12 is R741.6-billion.

SAinfo reporter and BuaNews

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