Drop in diesel usage a big contributor to lower tax collection says SARS Commissioner

Stephen Grootes gets the lowdown from the SARS Commissioner, as well as comment on the MTBPS from from RMB chief economist Isaah Mhlangu and Krutham's Peter Attard Montalto.

When Finance Minister Enoch Godongwana delivered his mini budget, he noted that tax collection for 2024/25 is expected to be R22.3 billion lower than was estimated for the February Budget.

During his Medium Term Budget Policy Statement (MTBPS), Godongwana said that in the absence of faster growth and in the face of external risks, tax revenue will remain under pressure.

Godongwana's revised growth expectations: 'At that rate, unemployment numbers only going to go up'

This would force Treasury to make 'difficult decisions' on where to spend, as lower revenue means they cannot 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."

Enoch Godongwana, Minister of Finance

Stephen Grootes talks to Edward Kieswetter, Commissioner of the South African Revenue Service (SARS) about the main causes of what is now a revenue shortfall.

Kieswetter highlights three main sources of this drop in expected tax collection, compared to the assumptions on which the February Budget estimates were made.

These are a decrease in individual taxes, diesel levies and import VAT and customs duties.

When the Budget estimate was provided there was an assumption that the Wage Bill would grow by 8.4%, whereas for the year to date it has grown by only 5.4%.

When it comes to diesel, Eskom's improved performance shown through the easing of loadshedding, has proved to be a double-edged sword.

At the same time, rooftop solar has replaced a lot of the traditional diesel generators, which has meant an 11% decline in the country's year on year diesel usage.

"About 1.33 million fewer litres of diesel were used... therefore our diesel levies are lower and that has given us an R8.4 billion dent."

Edward Kieswetter, Commissioner - South African Revenue Service

The third area of decline proved to be in imports, originally estimated to grow by 1.9%, whereas there's actually been a DEcrease of 3.7%, translating through to import VAT and customs duty being down.

"Those combined, have given us a deficit of R15.7 billion."

Edward Kieswetter, Commissioner - South African Revenue Service

Offsetting this downward trend slightly, corporate taxes (particularly in the middle to smaller business areas) have performed better than expected.

The payment of two-pot retirement savings withdrawals will also help boost the outlook for SARS, Kieswetter says.

"For the year to date, we've seen just over 1.6 million applications to which we've given directives."

"That amounts to just over R29 billion of funds that will be withdrawn, and that will translate to a tax of R7.26 billion and that's just year to date."

Edward Kieswetter, Commissioner - South African Revenue Service

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