Tax revenues falls significantly short of the projected estimates.
By Lehlohonolo Lehana.
The tax revenues are falling significantly short of the estimates projected at the time of the 2023 budget, with economists at the Bureau for Economic Research (BER) expecting a huge gap by the end of the year.
Budget data published by the National Treasury this past week showed that the country's budget deficit is growing, with tax revenues coming up short and government spending accelerating.
South Africa's monthly budget balance fell back into a larger-than-expected – and record – monthly deficit of R143.8 billion in July, from a R36.6 billion surplus in June.
"The fiscal balance is being squeezed from both the revenue and the expenditure side," the BER said.
"In the first four months of the current fiscal year (April to July), gross government tax revenue increased by only 0.8% year on year. This compares with the February budget expectation for an increase in the entire fiscal year of 5.6%," it said.
The economists said that if the current pace of underperformance in tax collections is sustained through the entire fiscal year, gross tax revenue will be R82 billion (1.2% of GDP) lower than the February projection.
This will be a particularly bitter pill for the South African Revenue Service (SARS), which saw tax collections much higher than anticipated in 2022/23. During the 2023 budget speech, Treasury revised its tax revenue collections to R1.68 trillion – R93.7 billion higher than the 2022 target.
For 2023/24, Treasury set the tax revenue target at R1.79 trillion.
While SARS faces pressure on the tax collection side, the BER noted that government expenditure is also outpacing budget expectations, increasing by 9% year-on-year in the April to July period versus a February budget forecast of +1.5% for the entire fiscal year.
"These trends support the view that the 2023/24 main budget shortfall will vastly outpace the 3.9% of GDP forecast in the February budget," the BER said.