Revenue target troubles SARS chief

• Acting commissioner says at launch of new tax season that many issues have detracted the tax collecting body from its mandate

The acting commissioner of the South African Revenue Service (SARS), Mark Kingon, is “having sleepless nights” about the revenue target.

SARS set itself an ambitious 2018 target of R1.344-trillion. It missed the collection target by R700m in 2017.

“There are many things that have gone on in the past few years that have detracted SARS from its mandate,” said Kingon at the launch of the tax season in Alberton on Monday.

Revenue collection fell short of budget targets over the past four fiscal years, with 2017’s shortfall amounting to R48.2bn.

Revenue collection is driven by the state of the economy, fiscal policy and administrative efficiency, but under suspended SARS commissioner Tom Moyane, who was shrouded in controversy, tax compliance was at low levels last seen during the 2008-2009 financial crisis.

Part of the challenge was to rebuild SARS’s credibility after compliance had fallen substantially, said Finance Minister Nhlanhla Nene.

“Government is faced with three objectives: to stabilise SARS, restore the credibility of the institution and meet the revenue targets. The commission of inquiry into tax administration and governance of SARS and the disciplinary hearing into the commissioner were under way to achieve this,” he said.

Analysts, however, do not all agree. “The way Kingon has mobilised his internal team at SARS and called on tax practitioners to do the same will go a long way to restore credibility. He has a long legacy at SARS and institutional knowledge. Compliance is in his blood,” said Deloitte managing partner for tax and legal Nazrien Kader.

PwC head of tax Kyle Mandy said the target was realistic but it would take time to restore trust.

The targets could also be jeopardised by low economic growth. The budget projected growth of 1.5% for 2018. Growth disappointed in the first quarter, with real GDP falling by 2.2%.

Keith Engel, CEO of the South African Institute of Tax Professionals, said: “The targets are set based on the government’s needs rather than what the economy can afford.”

He said tax compliance had fallen with the backdrop of corruption but the solution was not to keep adjusting the target upwards, but rather for government to cut expenditure.

“The government needs to look at selling off parastatals, shrinking the size of government and relooking public sector wage increases.”