Revenue points to improving economy

1 April 2010

South Africa’s revenue performance for the past year could be confirmation that the country’s economy is on its way to recovery.

The South African Revenue Service (Sars) collected an impressive R598.5-billion for the 2009/10 financial year – R8.1-billion more than the revised estimate announced by Finance Minister Pravin Gordhan in his Budget speech in February.

On Thursday, Gordhan attributed the increase in revenue to several measures introduced by Sars last year, including the tough penalty system for non-compliant tax payers.

He said that while consumption still remained low as a result of an estimated one million people losing their jobs last year, the results came as good news for South Africa.

“Clearly this is a phenomenal performance considering the conditions we find ourselves in,” he said. “It is a good story for the country, and reinforces what we’ve been saying that the recovery is on its way … it’s there, and it’s slow.”

Favourable comparison

He said despite the decline in revenue in the period 2008/09, South Africa’s overall revenue performance since the start of the economic crisis was favourable compared to developed economies and other emerging markets.

South Africa has seen an overall revenue growth of 4.5% over the past two-year period, while the United States experienced an overall decline of 14% for the same period. New Zealand recorded a 7.8% decline in revenue, while Australia and India both increased their revenue by 4.5% and 8.1% respectively.

Ensuring increased compliance

“International experience has shown that times of economic hardship do not only result in lower tax revenues, but also adversely affects the levels of compliance amongst taxpayers,” Gordhan noted.

In spite of this fact, Sars Commissioner Oupa Magashule said there had been a marked improvement in compliance by taxpayers, attributing this to improved database and filing systems.

He said Sars employees had also worked around the clock to ensure that people were compliant and filed their tax documents on time. Sars staff made more than 744 000 follow-up calls reminding taxpayers of their obligation to file returns on time.

Decrease in company tax

But it was not all good news, with the figures indicating a sharp decrease in tax collected from companies affected by the economic downturn.

Company Income Tax declined by more than R25-billion, of which about R12-billion could be attributed to the mining sector alone. Other sectors that were heavily affected included the financial sector, which declined by R14.5-billion, and the manufacturing sector, by R6.5-billion.

Source: BuaNews