Results show economy is recovering

Thursday, April 1, 2010

Johannesburg - South Africa's revenue performance for the past year could be confirmation that the country's economy is on its way to recovery.

The South African Revenue Service (SARS) on Thursday reported an impressive R598.5 billion revenue collection for the 2009/10 financial year. It is R8.1 billion more than the revised estimate announced by the finance minister during this year's budget speech in February.

Finance Minister Pravin Gordhan attributed the increase in revenue to several measures introduced by SARS last year, including the tough penalty system for non-compliant tax payers.

Gordhan said while consumption still remained low as a result of an estimated one million people losing their jobs last year, the SARS results came as good news for South Africa.

"Clearly this is a phenomenal performance considering the conditions we find ourselves in.

"It is a good story for the country and reinforces what we've been saying that the recovery is on its's there and it's slow," he said.

He said despite the decline in revenue in the period 2008/09, South Africa's overall revenue performance since the start of the economic crisis was favorable compared to developed economies and other emerging markets.

Over the past two year period, South Africa has seen an overall revenue growth of 4.5 percent while the United States experienced an overall decline of 14 percent for the same period. New Zealand recorded a 7.8 percent decline in revenue while Australia and India both increased their revenue by 4.5 and 8.1 percent respectively.

"International experience has shown that times of economic hardship do not only result in lower tax revenues but also adversely affects the levels of compliance amongst taxpayers," said Gordhan.

SARS Commissioner, Oupa Magashule, said there had been a marked improvement in compliance by tax payers and attributed this to improved database and filing systems.

He said SARS employees had also worked around the clock to ensure that people were compliant and filed their tax documents on time. SARS staff made more than 744 000 follow-up calls reminding tax payers of their obligation to file reruns on time.

But it was not all good news - as the figures suggest a sharp decrease in tax collected from companies and other corporates affected by the world economic downturn. Company Income Tax declined by more than R25 billion of which about R12 billion could be attributed to the mining sector alone. Other sectors that were most affected included the financial sector which declined by R14.5 billion and the manufacturing sector by R6.5 billion.