Corporate income tax collected in June, a key month when most corporate financial year end interim results get announced, shows that the National Treasury is likely to undershoot the 2023/24 tax collection targets set out in the February budget.
Data from asset management firm Futuregrowth shows that corporate income tax is underperforming as loadshedding, rail challenges, cooling commodity prices and low economic growth, weighs in on companies’ profits, and by extension, taxes collected.
“Data for the month of June, historically a crucial month for corporate income tax receipts, confirmed our concerns about the knock-on effect of structural hurdles to economic activity, falling commodity prices and weaker global growth on tax revenue collections,” said
Futuregrowth, which has more than R200-billion assets.
“Specifically, year-on-year corporate income tax receipts shrunk by 22% on a fiscal year-to-date basis relative to the 1% forecast by the National Treasury for the 2023/24 fiscal year. The buoyancy in personal income tax has buffered some of this underperformance, but the warning signs loom large for significant fiscal underperformance relative to estimates that National Treasury presented in the 2023 Budget.”
Most of the impact is likely coming from the key mining sector, with companies in the sector reporting a plunge in profits as low commodity prices and Transnet’s inefficient rail network hamper production and hurt exports.
The country’s biggest exporter of coal, Exxaro, this week reported a 32% decrease to R6.3-billion in interim profit. This is after the company said its coal production volumes were down by 7% to 20.2-million tonnes.
Mining giant Anglo American Platinum’s interim profit plunged about R19-billion as total platinum group metals production fell and metal prices declined. This is almost all the tax and royalties it paid in the 2022 financial year.
A report by RMB Morgan Stanley released last month warned that mining, which contributed handsomely to the fiscus in 2022, will not come to the party this year.
RMB Morgan Stanley collected data from 15 mining companies and estimated that taxes from the sector would come in at R50-billion in 2023, a big fall from the R110-billion in corporate taxes and royalties collected from the mining companies the previous year.
Corporate income tax is the third largest contributor to income tax, behind personal income tax and value added tax.
Futuregrowth said it was not all doom and gloom as some green shoots were being seen in the labour-intensive tourism industry.
“Positively, the labour-intensive tourism sector continues to recover, with foreign tourists arrivals growing by 54.7% year on year in May.
“Freight volumes also continue to show pleasing signs of resilience and recovery.”
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