The government's tax revenue collection fell only R16.7 billion short of expectations from last year's Budget forecast due in part to lower diesel import VAT receipts as load shedding subsided, and R1.85 trillion of tax revenue is expected to be realised.
Although corporate tax receipts benefited from better-than-expected profitability, slower import growth led to underperformance in import VAT collections.
Fuel levy receipts contracted amid falling demand and large diesel refund payments. Import VAT collections fell by more than 20 percent between 2022/23 and 2023/24 as nominal imports slowed sharply. While this has since moderated, tax receipts contracted by 1 per cent in the first 11 months of 2024/25 compared with the same period in the previous year.
Volumes of domestic and imported diesel contracted as load-shedding subsided. Significant diesel refund claims will be settled by the end of 2024/25, further reducing fuel levy collections.
Although provisional corporate tax collections from the mining sector contracted by 28 percent during 2024/25, this was offset by profits in other sectors.
Personal income tax collection grew at 12.6 percent over the first 11 months of 2024/25, reflecting the impact of tax policy measures announced in the previous Budget and larger-than-expected tax receipts from withdrawals once the two-pot retirement reform came into effect on September 1, 2024.
According to the Budget Review, the medium-term revenue outlook is revised up by R137.8bn relative to the 2024 Medium Term Budget Policy Statement (MTBPS).
The government expects to realise more revenue from the increases in the VAT rate in 2025/26 and 2026/27, which are expected to contribute "significantly" to additional revenue collection.
The government also predicts an improved outlook for employee compensation in 2025/26, which, alongside additional revenue expected from not adjusting personal income tax brackets for inflation and two-pot savings component withdrawals, are expected to support stronger personal income tax collections.
The tax-to-GDP ratio is expected to reach 25.4 percent by 2027/28, supported by an improved economic outlook. Gross tax revenue collections are expected to increase by 8.7% in 2025/26, 7.8% in 2026/27, and 6.6% in 2027/28.
This translates into gross tax revenue increasing from an expected R1.85 trillion in 2024/25 to R2.31 trillion in 2027/28, or up by a quarter in three years. National Treasury said higher revenue collection requires sustained investment and economic growth, supported by continued improvements in tax administration.
The government realised R11.6bn in tax from the two-pot retirement reform as of the end of February, well up from its initial estimate of R5bn. Two-pot withdrawals were expected to continue into the next three years.
The Global Minimum Tax, which came into effect in 2024, is expected to increase corporate tax collected over time. This tax requires domestic and foreign multinationals operating in South Africa, as well as South African multinationals operating in other jurisdictions, to pay more corporate tax to SA Revenue Services from the 2026/27 year, if their effective tax rate is below 15%.
SA Revenue Services intends to focus on the tax gap to improve revenue collection. This will be done by improving taxpayer compliance and trade facilitation by leveraging artificial intelligence and data science. Technology is also being introduced to simplify processes and enhance the single window platform, National Treasury said. SA Revenue services received an additional R4bn in the Budget, bringing its allocation to R7.3bn over the three years.
For the 2025/26 financial year, the government hopes to realise R2.06 trillion in gross tax revenue, while the main Budget revenue estimate for that year comes to R1.97 trillion after realising R36.4bn in non-tax revenue, R19bn in tax receipts from National Revenue Fund receipts, and disbursing R89.9bn to the South African Customs Union.
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