Commissioner for the South African Revenue Service (SARS), Edward Kieswetter, remained confident in accepting the revised revenue estimate presented by Minister of Finance, Enoch Godongwana.
In his Budget Speech n Wednesday, Godongwana announced an increase in the revenue estimate to R1.846 trillion, from R1.841 trillion announced in last year’s Medium-Term Budget Policy Statement (MTBPS).
The revised revenue estimate is an improvement from the October 2024 estimate and reduces the shortfall against the February 2024 estimate set at R1.863 trillion, from R22.3 billion to R16.7 billion.
Shifted economic assumptions negatively
South Africa continues to face tough economic conditions, which have consequently shifted economic assumptions negatively.
Despite this difficult economic environment, the projected revenue performance will lift the tax-to-GDP ratio up slightly to 24.7% in FY2024/25, compared to 24.5% in FY2023/24.
The tax buoyancy ratio has improved to 1.12 from the prior years of 0.66.
At the core of what SARS is doing is the steadfast pursuit of its mandate that emphasises revenue collection, compliance enhancement and the facilitation of legitimate trade.
The approach involves analysing how economic trends and tax and customs policies affect revenue collections.
By implementing its compliance programme effectively, SARS is better positioned to collect all revenue due to the fiscus.
The ongoing investment in SARS is essential to ensure effective tax administration.
Overall employment and consumption taxes have and are expected to perform strongly towards the end of the 2024/25 financial year whilst import taxes and fuel levies are expected to underperform.
Corporate taxes have grown positively except for mining corporate taxes that continue to underperform due to declining volumes and prices coupled with challenges in the networked logistics sector.
Employment taxes
At Budget 2024, the Minister of Finance announced, amongst others, tax policy measures that relates to employment taxes:
- No inflationary adjustments to tax brackets & rebates worth R16.3bn; and
- No adjustments to medical tax credits of about R1.9bn.
- Two Pot retirement fund withdrawal system, which was estimated to yield R5 billion in the 2024/25 financial year
Employment taxes were initially projected to grow year on year by 13.8% to attain the Printed Estimate.
This was based on an assumption that the wage bill would grow by 8.4%.
At MTBPS 2024, the wage bill estimate was lowered to 5.5%, and consequently the MTBPS estimate for PAYE being adjusted downwards, now requiring Y/Y growth of 12.4%.
The lower-than-expected growth in wages, and subsequent adverse impact on personal income taxes, was offset by the higher than estimated tax from pension fund withdrawals as well as a year-on-year growth in compliance revenue.
Value Added Tax
Domestic VAT, which was projected to grow at a rate of 7.1% in the 2024 Budget, has steadily maintained its growth projection.
This was greatly assisted by decreasing interest rates, lower inflation and interest rates, as well as withdrawals from pension funds, all of which boosted disposable income, and funding consumption.
Import VAT, on the other hand, is down because imports are down.
By the end of Quarter 3 of 2024, the actual import contraction was 1.3%, compared to a projected growth of 3.8% at the time of the MTBS.
This has reduced import VAT by R4.3bn Y/Y after refunds of R280.5bn.
Fuel Levy
The fuel levy has also adversely influenced revenue collection. In the 2024 Budget, the fuel-levy collection was estimated at R95.8 billion, and this was revised downward in the MTBPS to R82.4 billion, purely based on lower than estimated consumption.
Fuel consumption as at February 2025 was 21 billion litres compared to 24 billion in the prior year, due to increased energy availability.
Settlement of significant refunds of prior years has further reduced fuel levy.
It is now projected to end at only R80.6bn, or R15.2 billion lower than originally estimated.
Refunds
SARS remains firmly committed to making its contribution to foster an environment that support and stimulate economic growth.
Overall, as at 28 February 2025, tax collection yielded a Net revenue of R1 661.3 billion, from R2 074.6 billion gross revenue collections and R413.3 billion total refund payments.
In the same period, VAT refund payments were R338.0 billion reflecting growth of R21.3 billion (6.7%) from the previous financial year.
The growth in VAT refunds was driven by VAT credit returns submitted (in liability value) in relation to increased input tax declared.
Company Income Tax
At Budget 2024, CIT Provisional Tax was set at R302.5bn, expecting year-on-year contraction of 3.3%.
The main driver behind the contraction is largely from the downward performance of the mining industry.
This is best demonstrated by a contraction in CIT Provisional tax payments from large companies in the Mining sector (-28.4%) and the Manufacturing sector (-1.6%), which recorded the largest negative trends when compared to the prior financial year 2023/24.
The Y/Y contraction is due to a poorer performance from Platinum Group Metals as well as Coal commodity prices, largely driven by fluctuations in global demand.
Minister Godongwana has acknowledged that SARS has made significant strides in its effort to rebuild and enhance its ability to efficiently and effectively manage tax administration.
Despite the tough economic environment, SARS’s administrative efforts are realising incremental benefits in revenue collection.
Commissioner Kieswetter said: “SARS revenue collection account for 90% of Government expenditure. This requires SARS to do all that is possible within its mandate to ensure that all revenue due to the fiscus is collected to support the government’s development goals, despite the sluggish economy. Efficient and effective collection of all revenue will help to maintain overall fiscal stability. Pursuit of domestic resource mobilisation is key to our country’s development and protecting its future.”
To meet the challenge posed by the revised estimate of R1.846 trillion, SARS will continue to sharpen its approach to tax collection that involves enhancing compliance measures. It will also continue to employ advanced data analytics, machine-learning algorithms, and artificial intelligence, to improve service to taxpayers, whilst improving its capability to detect and respond to general non-compliance and serious tax crime.
The new net revenue estimate for FY 2025/2026 is R2.006 trillion. The revenue estimate comes against the backdrop of an economic outlook that is challenging both globally and domestically. The new net revenue contains a combination of several new policy measures, including a small increase in VAT, as well as a continued focus on administrative efficiencies. Vat will increase by 0.5 percentage points in each of the next two years, bringing VAT rate to 16% in financial year 2026/27.
SARS welcomes additional funding to the organisation over the MTEF period announced today by Minister Godongwana. SARS will deploy these resources to pursue debt that is owed to the organisation and all outstanding returns. It will also be used to modernise and strengthen its technology capability especially the use of data science, machine learning algorithm and artificial intelligence to respond to the sophisticated and aggressive schemes, including dealing with the illicit economy, which has had deleterious effect on our industry with accompanying loss of jobs and constraining our economic prospects. It will also be used to enhance efforts to facilitate legitimate trade while also frustrating illicit activities.
The tax policy measures proposed in the 2025 Budget will have a net revenue impact of R28.0 billion for the fiscal year 2025/26 and R44.2bn for the fiscal year 2026/27. The details of the zero-ratings are included in the draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill released today for public comment to assist in refining the proposals.
“Whilst we have seen encouraging progress at SARS, we remain painfully aware that much more has to be done to address the tax gap and in particular modernise SARS to respond to illicit economic activities and tax crime, aggressive tax planning, and many other instances of non-compliance. All these means that there are vast amounts of tax revenues that remain uncollected. Our efforts in this regard has to be stepped up with determination and unyielding focus.
I wish to express my sincere appreciation and gratitude to the 13 000 SARS employees who always courageously respond to the call of the Minister. I have no doubt that they will do all in their power to meet this year’s revised revenue estimate. Driven by our commitment to the pursuit of the Higher Purpose, I know, they will spare no effort in rising to the challenge that stands in the way of a dignified life, where children’s education is funded, the elderly receive their grants, and life-saving medication is provided to our citizens, to mention a few beneficiaries.
I wish to thank all taxpayers and remind everyone that our destiny as a nation is inescapably and inextricably interlinked. Our country’s prosperity demands that all of us roll up our sleeves and do the hard work so that we can leave to the next generations a country that they can be proud of, where each person can thrive and fully partake in the rewards of our unified endeavors”, concluded Commissioner Kieswetter.
Have you seen evidence of SARS getting its ducks in a row in recent years?
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