Revenue shortfall at Sars ‘self-inflicted’
• Commission of inquiry told that collection woes are ‘far from over’
The SA Revenue Service (Sars) has breached regulations by inflating compliance figures for corporate and personal income tax, the auditor-general found in his latest report.
This was among the shocking evidence heard by the Sars commission of inquiry into governance and administration at the tax agency on Tuesday.
The agency’s actions were described as “very serious” by the evidence leader, advocate Carol Steinberg, and member of the commission professor Michael Katz, who warned they had far-reaching implications for the budgeting process and future tax periods.
The commission also heard that the revenue shortfall, which totalled R100bn over the past four years, could not just be attributed to economic factors, that it was self-inflicted and if the evidence presented before the inquiry was anything to go by, Sars’s revenue collection woes were far from over, which could mark yet another blow to SA’s already stretched fiscal position.
Two presentations from senior officials showed that Sars’s debt had risen from R85bn in 2015 to R135bn in 2017 and that compliance levels had dropped dramatically.
The evidence before the inquiry — the increase in debt, a real drop in compliance and gerrymandering compliance figures — coupled with findings by the tax ombudsman that Sars was unnecessarily withholding refunds, suggests there may even be questions around whether Sars actually collected more than a R1-trillion in revenue in the 2017-18 tax year. This was a milestone suspended tax boss Tom Moyane has
boasted about. The commission, chaired by retired judge Robert Nugent, also heard how Sars had told “half-truths” to parliament on compliance and how the critical and world-renowned compliance unit at the tax agency was destroyed in the far-reaching restructuring by consultants Bain under Moyane.
During the second leg of public hearings in Pretoria, Steinberg described the evidence she received on the “very serious finding” by the auditorgeneral, saying it was submitted in the form of an affidavit from a Sars official, whose identity she could not reveal due to confidentiality agreements.
She told the commission the auditor-general had found that Sars had overstated its compliance levels for both personal income tax and corporate income tax in its public documents — a move likely aimed at bolstering its public image.
She said regulations gazetted on how to measure compliance, as well as the income tax act, had been flouted.
Sars “domain specialist” and former group executive for tax and customs compliance and risk, Thabelo Malovhele, then revealed that “some” in the agency believed compliance figures could be improved by “working the numbers” or “changing definitions”.
Asked whether the revenue shortfalls could be attributed to the state of the economy, Malovhele replied: “I don’t buy that story. The shrinking base is not the economy.
“Don’t blame the economy, because the economy does not collect a return that is outstanding … our payment compliance is very high; if you collect the return, the likelihood of getting that payment is high.”
He said noncompliance for pay as you earn stood at a startling 31%, VAT filing noncompliance at 39% and corporate filing noncompliance at 86%. He explained how the Sars compliance unit had been built from scratch by him and his team from 2007 and then was simply obliterated during the Bain restructuring.
Sars executive Randall Carolissen gave similar evidence, saying there had been no need for the restructuring, however the Sars leadership had proceeded with it anyway.