Sars recovers billions
RESOLUTE: COMMISSIONER VOWS TO GO AFTER ROGUE PAYERS
Agency follows up on defaulters to collect R70.3bn debt.
The South African Revenue Service (Sars) has made a sizeable dent in clawing back some revenue losses due to the high levels of illicit tobacco products in the market.
Finance Minister Enoch Godongwana announced that investigations and prosecutions by the tax agency have resulted in additional assessments worth R10 billion from key players in the illicit market.
Sars commissioner Edward Kieswetter said in a statement following the 2024 budget speech that a focused compliance programme and improved taxpayer and trader compliance underpin “fiscal sustainability and consolidation”. He warned that those who fail to register, file and pay their taxes will face the consequences of breaking the law. Besides breaking the law, they are also placing an unfair burden on honest, compliant taxpayers.
Compliance efforts
Since the end of former commissioner Tom Moyane’s era, Sars has focused on compliance and has increased efforts to improve its administrative capability.
Kieswetter said the largest contributors to its compliance programme in the tax year to date include the large business and international segment of the economy, where focused compliance initiatives yielded R17.2 billion – up by R15.7 billion from the prior year.
Sars has also been following up on defaulting taxpayers to collect outstanding debt of R70.3 billion, up 16.7%.
This includes enforcement actions in syndicated tax and customs crimes, which delivered R13.5 billion, up a whopping 246%. Sars also prevented revenue leakage of R85.6 billion, while customs and excise interventions yielded another almost R13 billion.
Dipping into reserves
A concerning and disappointing move by Godongwana was the announcement of how the government intends to reduce borrowing requirements. The intention is to withdraw from the South African Reserve Bank’s (Sarb) Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
This account protects Sarb from currency volatility. The account has grown to over R500 billion due to significant rand depreciation. Godongwana said the government will draw down R150 billion in the next two years. Another R100 billion will be distributed to the Reserve Bank’s contingency reserve, reducing the R500 billion to R250 billion.
Elna Moolman, head of macroeconomic research at Standard Bank SA, says it was disappointing that only “guiding principles” on how the funds will be used were provided in the budget. The only undertaking given is that it will eventually be “formalised through legislation”.
“The guiding principles in the budget are pragmatic, but we would’ve preferred [to see] the GFECRA only being used once its use is legislated to ensure that future use will remain prudent,” she adds.
A ‘balanced’ budget
Thabani Ndwandwe, chief risk officer at Standard Bank, says the bank considers the budget “quite balanced” in an election year. He suspects investors will see it in a positive light because there were no major shock announcements.
“We were hoping for more news on structural reforms to address the issues that are preventing growth, particularly around the state-owned enterprises.”
The minister acknowledged logistical failures are hampering economic growth. Ndwandwe says Godongwana offered little in the form of solutions to this crisis.
He expressed concerns about dipping into the bank reserves, even though it is understandable that a country may need to draw from its reserves. The question is what methodology will be used that will not compromise the independence of the bank.