Finance Minister Enoch Godongwana has revealed that tax revenue for 2023/24 is now expected to amount to R1.73 trillion, which is R56.1 billion less than what National Treasury expected in the 2023 Budget.
FINANCE Minister Enoch Godongwana has revealed that tax revenue for 2023/24 is now expected to amount to R1.73 trillion, which is R56.1 billion less than what National Treasury expected in the 2023 Budget.
In the 2024 Budget Review, government added that tax revenue in 2021/22 and 2022/23 performed better than expected mainly due to higher commodity prices.
In his budget statement, Godongwana said that “the weak performance of our economy has resulted in a sharp deterioration in tax revenue collection”.
“The shortfall is largely due to the decline in corporate profits and revenue from taxes on mining,” he added.
No VAT increase
The minister noted in their Budget Review that there would be no increase to income tax and value added tax (VAT).
“Revenue from both corporate income tax and VAT is expected to remain subdued due to low profitability in many sectors and the adjustment costs of new investments in energy generation and storage.
“Recent personal income tax collections have outpaced expectations, but rate increases could threaten economic growth and prompt negative taxpayer behaviours,” Treasury said.
Revenue collection
Revenue collection has deteriorated according to government over the past year due to weak economic conditions.
Tax revenue for 2023/24 is expected to reach R1.73 trillion, an upward revision of R0.7 billion from the 2023 MTBPS estimate.
The tax-to-GDP ratio is expected to decline to 24.6% in 2023/24, according to Treasury and even though earnings have remained resilient, corporate profits have declined.
Tax revenue slowed in 2023/24 as corporate tax collections contracted by close to 14% over the first 10 months of the financial year relative to the same period in the previous year.
Personal income tax
Godongwana said Treasury hopes to raise revenues through personal income tax by R15 billion in 2024/25. It will be done through a number of proposals but said that there will be no inflation adjustments for personal income tax brackets but noted that there would be inflation adjustments to some excise tax rates.
“Nearly all of the increase in revenue is effected through direct taxes, with no rate increases. Personal income tax is increased by not adjusting the tax brackets, rebates and medical tax credits for inflation. The remainder will be collected through increased indirect taxes,” Treasury said.
* Read Finance Minister Enoch Godongwana’s full Budget Speech here
