South Africa’s Revenue Growth Continues

South African Revenue Service
South African Revenue Service

The South African Revenue Service had another strong year in 2011/12, collecting R742.7-billion in revenue – R4-billion more than Finance Minister Pravin Gordhan had budgeted for, and R68-billion more than the amount collected in the previous financial year.

Making the announcement in Pretoria on Sunday, Gordhan said the budget deficit of 4.8% estimated in February’s budget had also gone down to 4.5%.

The three main revenue contributors were personal tax, corporate income tax (CIT) and Value Added Tax. Collections from personal income tax increased from just over R228-billion in the 2010/11 financial year to over R251-billion this year. Company tax collections also increased to R153.747-billion from R134, 635 in 2010/11.

Gordhan noted that although there has been growth of 14.2% year-on-year, CIT remains below the peak of R165.5-billion officials managed to collect in the 2008/09 period. “This slow recovery of CIT in the main accounted for the current tax to GDP ratio, which remained flat,” he said.

‘Good platform for future growth’

Company tax collections also benefited from the stronger imports in the automotive sector, coupled with increased investments in capital-intensive industries such as energy, manufacturing and agriculture. “This is an important indicator of investor confidence in the future of the domestic economy and provides a good platform for future growth,” said Gordhan.

Agriculture, mining and telecommunications contributed over R34-billion in taxes combined, while banks, insurance and other financial services were taxed more than R40-billion. The manufacturing and petroleum sector contributed over R34-billion to the country’s revenue.

Officials noted that the past three years saw a contraction in the construction sector following the boom period leading up to the Fifa soccer world cup hosted in South Africa. This also led to a decline in the manufacturing sector, where production volumes are said to be recovering moderately.

“The mining, finance, as well as wholesale and retail sectors showed robust growth on the back of a modest economic recovery,” read documents from Sars.

Economy ‘continues to demonstrate resilience’

Gordhan said the country’s economy grew by 3.1% and continued to demonstrate resilience in an uncertain global environment. The domestic environment has also been improving, with 20 000 jobs created each quarter. According to the minister, given the tough economic climate, SARS had done very well, and with more compliance, the revenue service could continue to improve.

“Once again, SARS has served the people of South Africa very well notwithstanding the challenges that we see in the world economy. The vast majority of South Africans pay tax and make contributions to the fiscus by paying VAT, excise duties and the fuel levy on the goods and services they consume,” Gordhan said.

Over the past three-year period, South Africa had seen an overall revenue growth of more than 4.5%, while world markets such as the US and Europe continued to decline.

Although the global crisis was no closer to resolution, buoyant growth in tax revenue in South Africa was driven by the strong performances of import taxes, the recovery of combined profits and resilient consumption. Moreover, strong revenue growth benefitted from the financial sector’s strong contribution, which is R18-billion or 10% higher than the previous year.