A R13.4bn undershoot on fuel levy collections forecast for the 2024/25 fiscal year relative to budget 2024 estimates, a R13bn undercollection in VAT revenue and R9.7bn lower personal income tax are the major contributions to a R22.3bn shortfall in tax revenue forecast for the year.
Specific excise duties were also R600m lower. Offsetting these declines are an estimated R11.7bn higher collection on corporate income tax, R3.4bn more from dividend taxes and R2.4bn more from other taxes. Whereas the budget forecast gross tax revenue of R1.863-trillion for 2024/25, the National Treasury has revised this down to R1.840-trillion.
“Net fuel levy collections contracted by 3.9% compared to the same period in 2023/24 as fuel demand fell sharply,” finance minister Enoch Godongwana said on Wednesday. “Lower projected fuel levy collections are also affected by a large one-off diesel refund payment expected to be settled this year.”
The Treasury said the undercollection of fuel levy receipts relative to 2024 was expected to flow through to the outer years of the medium-term revenue outlook.
Chris Axelson, Treasury’s acting head of tax and financial sector policy, said the decrease in fuel levy collections was also due to the decline in load-shedding, which meant Eskom used less fuel to power its gas turbines.
Import VAT collections contracted by 4.5% compared to the same period in 2023/24 as a halt in load-shedding led to lower imports of renewable energy-related components. Customs duty collections grew moderately but are expected to fall short of 2024 budget estimates in line with weaker economic growth. However, domestic VAT collections are expected to exceed budget expectations.
Personal income tax collections are expected to underperform, Treasury said, with private sector employment and wage rates weaker than projected in the 2024 budget.
Higher-than-expected corporate tax collections were aided by enhanced productivity gains due to the termination of load-shedding, it said.
“The outlook for corporate profitability has improved amid easing supply-side constraints,” the Treasury said. “Improved sentiment and reduced inflation and borrowing costs augur well for consumers’ purchasing power.”
Axelson said in an interview that the mining sector had deteriorated but that had been outweighed by the finance sector. Electricity, gas, water and manufacturing had also outperformed since the February budget.
The medium-term budget policy statement makes no mention of tax revenue generated by withdrawals from the two-pot retirement system, now estimated at R7.2bn from just over R29bn in gross withdrawals since the system was introduced on September 1. However, Axelson said the Treasury’s initial R5bn estimate was still built into the tax revenue estimate.
The Treasury said that compared with the 2024 budget estimates, gross revenue collection is projected to fall short by R41.4bn in 2025/26 and 2026/27 due to lower-than-expected energy imports.
“Improved tax revenues will require more sustainable economic growth and further gains in tax compliance and tax administration,” the MTBPS states, adding that the tax to GDP ratio was expected to remain at 24.5% in 2024/25.
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