Each financial year, the Finance ministry sets the tax agency a target for collections, based on economic conditions, policy initiatives such as an increase in rates and other considerations. This year, tax earnings are expected to contribute up to 70% of the country’s budget revenues, which are currently estimated at P82 billion.
Briefing the media last Thursday, BURS commissioner-general, Jeanette Makgolo, said the agency was on track to reach the target set by fiscal authorities for this financial year.
“Last year, we exceeded the set target of just over P47 billion by 4.55 percent to bag a total collection of P49 billion, a feat we are hopeful and confident we can achieve again this financial year,” she said.
While Value Added Tax (VAT) reverted to 14% earlier this year, collections will slightly be hampered by a wide range of exemptions and zero-ratings announced by government earlier this year, as a way of cushioning consumers. The performance of VAT and income tax are closely linked to the health of businesses and consumers, for whom 2023 has been a return to normalised rates of growth after the economic collapse during the pandemic.
Finance Minister Peggy Serame has said that government’s eyes are on BURS to mitigate tax revenue leakages and to consolidate tax revenue collections as the global economy faces many uncertainties.
“The BURS continues to put measures in place to improve tax revenue collection. All these efforts are geared towards improving taxpayer compliance and border security, thereby reducing revenue leakages and enhancing collection as well as strengthening trade facilitation,” she said in February while delivering the Budget Speech.
BURS’ projections that it will reach or surpass its targets will be a hopeful sign for authorities who are keenly watching developments around mineral revenues, another major contributor to budget revenues.
Thus far this year, mineral revenues, particularly those associated with rough diamonds, have faced turbulent times due to weakening demand in international markets.
Ongoing global economic uncertainties, especially in major markets such as the US, a softer than-expected contribution from China, the industry’s reputational knock from the continued flow of sanctioned Russian diamonds into the market as well as stiffer competition from synthetics, have worsened the industry’s challenges this year.
De Beers this year reported that the value of its first half sales dropped by 23%, while prices achieved also dropped 23%.
The Finance ministry has said it stands primed to revise downwards both its economic growth and budget revenue forecasts for the year.
“Prospects for the remainder of the year remain uncertain and could be revised lower than is currently projected if the situation worsens in line with the prevailing weaker global demand prospects,” technocrats said recently in a draft budget blueprint. “The impact of falling diamond prices could further lower supply amid increasing production costs. “Overall, this shortfall in supply could potentially reduce production much lower than 24.1 million carats that are anticipated at the end of 2023, which could have an adverse impact on the growth in mining and quarrying.”
