There has been a higher than expected uptake of tax deferral measures for provisional tax, excise duties that were aimed at providing relief after the COVID-19 pandemic slowed economic activity.
This is according to the National Treasury’s Budget Review for 2021, which was released as Finance Minister Tito Mboweni tabled the 2021 Budget Speech in Parliament on Wednesday.
“The take-up of tax deferral measures for provisional tax and specific excise duties, and those granted on a case-by-case basis, were higher than expected for these categories, providing cash flow relief of over R28 billion.
“Some corporate, individual and trust provisional tax deferrals may still be claimed.”
The National Treasury said, meanwhile, that there was lower take-up of the PAYE tax deferral, with companies only using R1.9 billion of the projected R19 billion.
An additional R4 billion in tax deferral relief has been provided to the alcohol industry in the past month through case-by-case applications.
“These deferrals will flow through to the next fiscal year.
“For the direct tax relief measures, the exemption from the skills development levy provided relief of about R5.9 billion, in line with estimates.
“Companies could choose to benefit from either the Temporary Employer/Employee Relief Scheme (TERS) or the expanded employment tax incentive, and claimed R57.3 billion from the TERS against only R1.4 billion from the employment tax incentive.”
The National Treasury said by mid-February 2021, of the total R70 billion in estimated tax relief from the COVID-19 measures, R40 billion had been taken up.
“Shortly after the 2020 Budget was tabled, South Africa entered a strict lockdown to contain the pandemic, severely limiting economic activity.
“Government provided relief for households and businesses, including through tax deferrals and direct tax relief. In combination, these dynamics led to a steep downward revision to tax estimates.
The National Treasury said this year’s revenue outcome highlights the severe economic impact of COVID-19 on a struggling economy.
As a result, expectations of tax base growth have deteriorated significantly since the 2020 Budget.
Personal income tax collection has been affected by rising job losses and lower earnings for those who are employed.
The National Treasury also said that corporate income tax collections have been contracting since 2018/19 and will continue to fall this year.
“Specific excise duties are expected to fall by nearly 50 percent as a result of restrictions on trading activity and tax deferrals.
“Since October 2020, there has been a stronger-than-expected rebound in domestic value-added tax (VAT) and customs duties flowing from the rise in consumption once lockdown restrictions eased.
“Monthly domestic VAT collections since August were higher than the corresponding months in 2019, and fuel levy collections have also improved.”
The National Treasury said a surge in provisional corporate tax payments in December exceeded expectations.
“This was primarily driven by the mining sector, with companies benefiting from high commodity prices and a favourable exchange rate. Personal income tax collections remain under pressure due to the elevated levels of unemployment flowing from the pandemic.
“A gradual recovery in revenue is expected over the medium term. Personal income tax will respond to employment growth, which is expected to be slow; and the pace of corporate income tax growth will be affected by assessed losses likely to have occurred in 2020.”