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Tax revenue for the 2018/2019 fiscal year is expected to be R15.4bn lower than the forecast made in the medium-term budget policy statement (MTBPS) in October, bringing the total shortfall compared with the 2018 budget to R42.8bn. The revenue shortfall in the medium-term budget was estimated at R27.4bn. Finance minister Tito Mboweni said in his budget speech on Wednesday that “approximately half of the increase in the shortfall since October is due to higher-than-expected VAT refunds”. In terms of the 2019/2020 budget, the revised gross tax revenue for 2018/2019 is R1.3-trillion, rising to R1.4-trillion in 2019/2020.

The revenue shortfall reflects a weaker economic outlook, further increases to VAT refunds and problems with tax administration, as highlighted by the Nugent commission of inquiry into the SA Revenue Service (Sars). “Economic weakness has fed through to lower personal income tax and corporate income tax receipts. Administrative weaknesses in collection were a cont...

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