Strong growth boosts S.Africa tax revenue

Sat 31 Mar 2007, 10:58 GMT

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CAPE TOWN (Reuters) - South Africa exceeded its revenue target by 3 billion rand in the 2006/2007 financial year thanks to strong economic growth and efficient collection, government said on Saturday.

The South African Revenue Service (SARS) collected 493 billion rand in tax, above its target of 489.7 billion rand.

Finance Minister Trevor Manuel told a news conference that stronger-than-expected economic growth and improved administration of tax collection had boosted receipts.

"The strong yield... has been influenced largely by stronger-than-expected economic growth that has reached five percent over the past two years," he said.

Personal income tax, which is the largest contributor to tax revenue, rose to 140 billion as the tax register grew by 6.7 percent on the back of increased employment.

Household spending growth of 7.3 percent accounted for government's meeting its target of value-added tax of 134.5 billion -- the second largest contributor.

Household demand has been partly driving economic growth in Africa's largest economy and consumers have turned to imports as the manufacturing industry has been unable to meet the demand.

SARS also collected 2 billion rand more in corporate tax, to 118 billion rand, while the secondary tax on companies contributed 15.7 billion rands to the total revenue.

Manuel said South Africa's government expenditure in 2006/07 financial year was 468 billion rand and there was a possibility of a surplus in the current financial year.

"The revenue performance lays the foundation for government to realise its ambition to create the fiscal space needed to improve the lives of all South Africans," he said.

Manuel was criticised early in his term for his conservative fiscal stance, which focused on paying off the country's debt, but in his budget in February he outlined South Africa's first budget surplus of about 0.3 percent of GDP in 2006/07.

He said South Africa now had space to spend more on social services such as education and health.

"Over the past few years government's fiscal strength has enabled us to improve expenditure on social delivery and investment infrastructure," he said.