Growth slows, but VAT hopes high
• Telecommunications industry reforms and boosting competition by lowering barriers to entry could give GDP leg up, economist says
Disappointing growth in the first quarter has not damped expectations for higher VAT revenue at the South African Revenue Service despite a slower than expected collection of VAT in April. This was the month in which the new one percentage-point hike in VAT kicked in.
Disappointing growth in the first quarter has not damped expectations for higher VAT revenue at the South African Revenue Service despite a slower than expected collection of VAT in April.
This was the month in which the new one percentage point hike in VAT kicked in.
VAT collection improved by 6.2% to R21.4bn in April from a year earlier. The forecast is for R348.1bn for the year.
Razia Khan, Standard Chartered chief economist for Africa and the Middle East, said on Wednesday that the VAT hike had not yet made “that much impact”.
Khan was addressing investors and the media on the economy in Sandton, where she also said reforms in the telecommunications industry and in boosting competition by lowering barriers of entry could add one percentage point to GDP. In other economies globally, efficient treatment of revenues from VAT resulted in an automatic boost to growth, although this growth was transitory.
VAT is the second-largest contributor to national revenues after personal income tax.
Growth for the first quarter contracted by a greater-thanexpected 2.2% quarter on quarter, driven by declines in agriculture, mining and manufacturing, data that Statistics SA released on Tuesday reflect. The market consensus was for 0.5%.
Acting SARS commissioner Mark Kingon told Business Day that a clearer picture of VAT collections would only emerge at the end of June as some VAT is collected at the end of May and at the end of June.
“Some people are on a bimonthly cycle, some on a monthly cycle so you will only see the effect of the 1% adjustment really at the end of June,” Kingon said.
The hike was introduced in the February budget following a budget shortfall of R48.2bn.
But even though Kingon is upbeat about collections improving, compliance was a major challenge, he said on Monday after announcing that the tax season would be shortened by three weeks to allow the revenue service to conduct audits later in 2018.
Tax season will open on July 1 and close on October 31.
Kingon said in April that 14,000 VAT vendors had filed returns but failed to pay VAT totalling just more than R1.1bn to SARS. Various projects were under way to deal with noncompliance, he said.
“We cannot allow that. People cannot use cash flow of what we call agency taxes, whether it be VAT or PAYE [payas-you-earn], to supplement their own cash flows.
“We need to deal with that effectively,” Kingon said.
Quicker identification of problem cases was one intervention, he said. SARS employees now knew that they had to follow up immediately when they received a return without payment and not to ignore the matter for a month.
Perceptions of corruption at SARS still affected compliance, but he said: “We are trying to rectify those perceptions and simply do what is right.”
Among developments at SARS was progress in the rejuvenation of the large-business centre, which offers customised service to large-business taxpayers. It was established in 2004 but allegedly lost steam in the restructuring of SARS after Tom Moyane was appointed as commissioner. Kingon said a meeting would be held this week with teams at the largebusiness centre in which a proposal would be tabled.
He said details would be released later but added: “Whether it be the large-business centre in the form that we used to be, I don’t think so. It might be one on steroids compared to that. There also might be short-term, medium-term and longer-term things we do.”