Today’s post by Lisa Martin plots a summary of historical National Treasury revenue forecast errors by major component. As we showed in our paper on fiscal forecast errors, between fiscal years 2016/17 and 2020/21, these surprises reflected generally weaker than-expected personal income tax (PIT), corporate income tax (CIT), and value added tax (VAT) receipts. Post-pandemic, PIT, CIT, and domestic VAT tended to be under-estimated, initially reflecting higher commodity revenues from unexpectedly high global commodity prices and an increase in mining exports before becoming more broad-based. To summarise the overall impact of government revenue forecast errors, today’s post plots the cumulative totals of forecast errors by category since 2013. The largest
individual over-estimates of revenue over this period were for PIT and VAT, particularly in the 2020/21 fiscal year. The largest under-estimations of revenue components occurred in the 2021/22 and 2022/23 fiscal years, with CIT being the largest contributor to underestimations of revenue. With regards to the cumulative effect of forecasting errors, PIT and VAT underperformed relative to forecasts, while CIT exceeded expectations over the period. Large PIT over-collection reflected a short-lived increase in commodity prices and mining exports in 2021 and 2022.
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