Budget: Godongwana reports strong revenue collection amid fiscal challenges

Finance Minister Enoch Godongwana on Wednesday said revenue collection in the first six months of 2025/26 has reached R924.7 billion.

The amount collected is higher than the corresponding period last year and R17.5 billion over the 2025 Budget estimates.

Tabling the Medium-Term Budget Policy Statement, Godongwana said the gross tax revenue for 2025/26 has been revised up by R19.7 billion.

“The in-year revenue improvement was, in part, due to once off collections from corporations and higher household expenditure. The revenue overrun narrows the 2025/26 budget deficit and enables government to add funding for spending priorities and frontload capital investment,” he said.

Godongwana said the R19.3 billion revenue overrun and lower than expected borrowing costs will help to accommodate a proposed R15.8 billion increase in non-interest spending while the budget deficit narrows by R8.2 billion.

Addressing the Joint Sitting of Parliament, Godongwana said the more than estimated tax revenue of R19.7 billion was due to stronger household expenditure which has boosted VAT collection and improvements in corporate tax receipts and dividend tax.

“Lower than expected VAT refunds also contributed to the improved revenue outlook. This higher revenue allows us to bring forward some once-off expenditure.”

The minister stated that SARS data for the six month period into 2025/6 revealed that debt collections remain below estimates because of the legal and technical complexity of settling many cases.

“SARS has obtained additional skills to address complex cases, which should improve collections for the rest for the year.”

Godongwana said SARS was allocated R4 billion as indicated in the 2025 Budget to increase debt collection from R20 billion to R50 billion a year.

“This allocation was intended to strengthen debt collection, and thereby increase revenue collected by between R20 and R50 billion a year,” he said.

 The taxman has been allocated R7.5 billion over the 2025 MTEF period to recover large tax debt ad invest in new technology, data science and artificial intelligence to strengthen collection efficiency and transparency.

“The impact of an overall revenues emanating from these resource injections will occur over time and, in some cases, may be affected by legal processes,” Godongwana said.

He told the MPs that the government will continue to monitor SARS revenue performance to determine whether the R20 billion in additional tax increases for the 2026 Budget proposed in the 2025 Budget may be withdrawn.

“A final decision will be announced in the 2026 Budget.”

He said there were two options - either to raise tax or cut expenditure.

“There is no other way,” said the minister.

Responding to questions during a media lock-up prior to delivering the Budget, Godongwana said the VAT increase was no longer on the cards.

“It is off the table for now,’” he said.

However, Godongwana told MPs that that the better-than-expected revenue performance in 2025/26 and the gross revenue collection was projected to fall short of 2025 Budget estimates by R15.7 billion in 2026/27 and 2027/29.

“This is in part because lower inflation results in a downward revision to the estimates for the tax base growth. Improved tax revenues will require more sustainable economic growth and further gains in tax compliance and administration.”

He also said over the medium term, consolidated spending will increase from R2.6 trillion this year to R2.9 trillion in 2028/29.

"Our commitment to support low-income and vulnerable households through education, health and social protection remains."

mayibongwe.maqhina@inl.co.za