South Africa Tax Take Exceeds Budget Estimate for Second Year

(Bloomberg) -- South Africa's preliminary tax collection exceeded its budget estimate for a second consecutive year, buoyed by windfall mining-company profits and the easing of coronavirus lockdown measures.

The South African Revenue Service collected 1.56 trillion rand ($106.7 billion) in the fiscal year through March 31 2022, Commissioner Edward Kieswetter told reporters Friday in Pretoria, the capital. That's 16.7 billion rand more than projected in the February budget and represents a 25% increase from the prior fiscal year.

The better-than-expected outcome means the budget deficit as a percentage of gross domestic product for the past fiscal year could be less than the National Treasury's February projection of 5.7%.

The data is the latest sign that headway is being made in rebuilding a revenue agency that was rendered ineffectual during former President Jacob Zuma's scandal-marred rule, with a number of inappropriate appointments made to senior posts, some officials forced to quit and key units disbanded.

Corporate income taxes accounted for almost 21% of the total tax take. That's as high prices and robust demand for commodities boosted mining-company profits in South Africa, the world's biggest platinum and palladium producer. Personal income and value-added taxes, the two biggest revenue line items, accounted for 36% and 25% respectively.

While the Treasury in February projected that tax revenue for the fiscal year that started on Friday is expected to reach almost 1.6 trillion rand, the ongoing commodity boom that's being stoked by Russia's invasion of Ukraine could see the target revised higher. The forecast accounts for a one percentage point cut in the corporate tax rate that comes into effect this month, but it doesn't take into consideration the government's decision to cut general fuel levy by almost 40% for two months to mitigate against the impact of rising crude prices -- a concession that will result in foregone tax revenue of 6 billion rand.

President Cyril Ramaphosa's efforts to rebuild the tax agency started with Kieswetter's appointment in May 2019. It has since sought to enforce tax compliance and set up units to handle the tax affairs of large businesses and high-net worth individuals.