2023 tax revenues expected to exceed 2022 projections by R1.4 billion |17 November 2022
Tax revenues for the year 2023 are projected at R9.21 billion, representing around 86 percent of the country’s total revenue.
Taxes, a direct function of the country’s economic performance, are projected to exceed this year’s projected collection by R1.4 billion, an increase of around 18 percent or 2.21 percent of Gross Domestic Product (GDP).
This is primarily due to recently announced changes in taxation lines, coupled with increases in Value-Added Tax (VAT) and business tax, as well as other tax.
With the proposed tax reforms and increases announced by Minister for Finance, National Planning and Trade Naadir Hassan during the budget address on Friday November 4, an increase of around R124 million is expected in Personal Income Tax (PIT), driven by GDP growth and the public wage review which is to take effect as from April 2023.
Customs duties which have also been revised upwards as government expects recovery in the level and value of imports is to contribute an additional R50.2 million, while excise tax, also with an imports component, is expected to perform better and grow by R232.9 million. Excise tax on petroleum is a key revenue earner.
Over the next year, analysts are projecting VAT revenues to increase by around R290.3 million, due entirely to the expected improved economic performance.
Meanwhile, business tax is being revised by over R400 million, half of which is down to announced reforms.
Additionally, the Tourism marketing tax, also linked to economic growth is expected to contribute R6.5 million, while other tax is set to increase by about R305 million, the majority of which, R280 million, to be derived from new tax policies, including the environment tax.
Breaking down the proposed new tax policies applicable as from 2023, the ministry on Monday noted that in the business tax category, the proposed tax reforms for business tax which covers the reform in taxation of securities dealers, is expected to bring in R218 million over the year.
Meanwhile, in the other tax category, government is projecting a collection of R162 million from the Tourism Environmental and Sustainability Levy, and R118 million from the Large Hotel Turnover Tax over next year.
In total, new taxation policies for 2023 are projected to amount to around R500 million, representing 1.6 percent of GDP.
As expected, the introduction of new tax policies will impact on outer years as a new source of income.
As such, the ministry projects R263 million from the reform of securities dealers, R20 million from the reform in Presumptive tax, R170 million from the Tourism Environmental and Sustainability Levy, and R129 million in Large Hotel Turnover Tax in 2024. The projected revenue impact of tax reforms is expected to contribute a total R582 million, representing 1.8 percent of GDP in 2024.
In 2021, collection was around R7 billion, but we had still not returned to the level we were at in 2019, prior to the pandemic. For 2022, the initial projected budget was R7,863,233 ad is projected at R7.79 billion, which is already above the 2019 level, indicating a recovery in tax performance. As we said, tax goes hand-in-hand with economic growth so when the economy is recovering and growing, taxes should also be in line with this, as we are seeing from the 2022 estimates.
Medium-term tax revenues are projected to increase in the medium term up to 2027.
Government had to make a downwards revision in the projected tax revenue for this year however, due to various factors. The finance ministry’s initial projection for the year was R7.86 billion, a figure which was revised during the mid-year review and reduced to R7.84 billion.
By the end of the year, bearing in mind there are still three months left for collection, the figure has once again been revised downwards, bringing it to R7.79 billion, not a major change from the initial budget.
As per records held by the ministry, there has been better performance in some lines of taxes such as VAT from the tourism sector in line with the increase in tourism arrivals, better performance in custom duties on alcohol and motor vehicle levy, as well as stronger stamp duty payments.
However, there have been certain shortfalls in Personal Income Tax (PIT), especially within the public sector, and this has been due to much delays in recruitment and the freeze in wages, meaning that PIT contributions from the sector have been lower than we expected.
There has also been some underperformance in local tobacco manufacturing excise tax, while certain sectors in VAT, such as finance and insurance, real estate and imports have also underperformed.
Despite the downward revision, this is still a major increase compared to 2021.
Non-tax revenue accounts for ten percent of government revenues and 4 percent from grants.
Laura Pillay