VAT refund backlog main culprit in R27 bln revenue shortfall


PARLIAMENT, October 24 – South Africa faces a revenue shortfall of R27.4 billion for the current financial year mainly due to the miscalculation of value-added tax (VAT) refunds owed by the state, the National Treasury said on Wednesday.

In its medium-term budget policy statement, the National Treasury said a backlog of payment in VAT refunds by the South African Revenue Service and an underestimation of refunds due to taxpayers had skewed the estimation of revenue growth for the year.

“Net VAT collections account for about R20 billion of the in-year revenue shortfall. Two factors account for the revision in net VAT,” it said.

“The VAT refund estimate has been revised upwards by R9 billion, and about R11 billion will be paid out to clear the backlog in the VAT credit book.”

The Treasury committed SARS to disbursing correctly filed VAT refunds within the mandatory timeframe of three weeks in future.

In August 2017, the tax ombudsman found that SARS had failed to pay certain VAT refunds in time.

South Africa’s technical recession was the second biggest factor putting downward pressure on revenue.

The National Treasury said revenue collection grew by 10.7 percent in the first six months of the year compared to the same period last year. However, the recession has begun to reflect in a lower collection.

“Weaker economic growth, alongside a once-off payment of overdue VAT refunds, will result in an in-year revenue shortfall now estimated at R27.4 billion,” it said.

The finance ministry was not envisioning new tax increases at this time, it added.

– African News Agency (ANA)