SARS tax revenue is falling short of 2023 projections

Reports have revealed that the South African Revenue Service’s (SARS) tax revenue is falling short of 2023 projections, and that could possibly cause the country to face a massive budget deficit at the end of the year.

South Africa’s fiscal situation is increasingly concerning “as tax revenue undershoots and government spending exceeds earlier expectations”, and this is according to the economists at the Bureau for Economic Research (BER).

The National Treasury has revealed that South Africa’s monthly budget balance fell back into a larger-than-expected and record monthly deficit of R143.8 billion in July, following a R36.6 billion surplus in June. The BER said: “The fiscal balance is being squeezed from both the revenue and the expenditure side.”

In April to July, the first four months of the current fiscal year, gross government tax revenue increased by only 0.8% year-on-year. This is in comparison with the February budget expectation for an increase in the entire fiscal year of 5.6%. “If the current pace of underperformance in tax collections is sustained through the entire fiscal year, gross tax revenue will be R82 billion – 1.2% of GDP – lower than the February projection.”

On the same note, the expenditure by the government is outpacing budget expectations, increasing by 9% year-on-year from April to July. This is a great height compared to the February budget forecast of a 1.5% increase for the entire fiscal year. “These trends support the view that the 2023/24 main budget shortfall will vastly outpace the 3.9% of GDP forecast in the February budget,” the BER added.

The National Treasury has proposed drastic steps to rein in spending as the government has run out of money and faces a debt trap in response to this situation. Recently, Sunday Times also reported that the National Treasury has sent a letter to provinces asking for significant expenditure cutbacks.

Included on the measures, are a freeze on new public service jobs, stopping procurement contracts for all infrastructure projects, and keeping public servant salary increases in check. “The spending cuts have been widely welcomed and indicated that the government had ‘run out of money’ and faced a ‘debt trap’ as growth had stalled,” The Sunday Times said.