Reopening large business centre the first step towards Sars’s recovery Kieswetter
Almost six months into his project to fix the SA Revenue Service (Sars), Edward Kieswetter says the revenue shortfall this fiscal year could be “a little worse” than what has been already reported, underlining the government’s challenge to get its finances in shape and avert further downgrades.
An economy that the SA Reserve Bank expects to grow just 0.6% in 2019 and a gap in the tax agency’s collection capabilities after a decade of state capture that almost destroyed the economy means it will be “extremely tough” for the agency to meet its targets, the Sars commissioner told Business Day on Wednesday.
The Sars commissioner was speaking ahead of the reopening of Sars’s Large Business Centre (LBC), the destruction of which during former commissioner Tom Moyane’s term of office was cited by the Nugent commission as one of the key factors that led to revenue shortfalls.
Kieswetter said the shortfall for 2019/2020 will probably be higher than the R16bn that has already been reported for the year to date.
The full amount will be announced next week when finance minister Tito Mboweni unveils his widely anticipated medium-term budget policy statement, the commissioner said. The tax agency has previously reported that for the 2018/2019 year, the revenue shortfall will be R57bn.
Poor economic growth and Sars’s capacity problems are “indivisibly connected” and there is “a gap that is purely a function of our capability”, Kieswetter said.
The reopening of the LBC is a milestone in the agency’s rehabilitation and was one of the recommendations of the inquiry into tax administration and governance at Sars, led by retired judge Robert Nugent.
Nugent found that the LBC was “eviscerated” under the auspices of an operational model review spearheaded by consultancy Bain & Company and Moyane.
The effect of Bain’s work has been felt in Sars’s ability to collect revenues, with Kieswetter saying under-collections amounted to more than R200bn over the past five years.
The return of the LBC which will provide a “one-stopshop” for large companies and wealthy individuals is intended to promote greater “voluntary compliance” among these taxpayers.
The centre will aim to improve communications with large taxpayers, particularly the provision of greater clarity on complex tax matters.
It will also focus on improved service and risk management through the use of data particularly the use of third-party data and artificial intelligence. Finally, it will aim to improve the detection of noncompliance earlier and enable the tax agency to respond “decisively and professionally”
THE REVENUE SERVICE FACES THE DUAL CHALLENGES OF POOR ECONOMIC GROWTH AND THE DAMAGE DONE BY STATE CAPTURE
“It’s about creating an intelligence capability to improve the service and level of awareness of taxpayers, but at the same time enforce compliance when it’s necessary,” Kieswetter said.
Aside from the relaunch of the LBC, Sars has taken other steps, including initiating a governance review in conjunction with the Treasury, which is expected by February 2020.
Kieswetter said he aims to rebuild the senior leadership team within the coming six months and the agency has reached out to former executives who left, three of whom have agreed to return.
Sars is also reassigning employees to more “meaningful work” after they were sidelined by the previous regime. “We’ve had numbers of people that were just marginalised,” he said.
About 200 senior staff were displaced during the restructuring and moved to jobs with no function or job description, and more than 3,000 staff members have resigned since 2014.
Sars is working with the various commissions of inquiry, including the Zondo commission and the commission of inquiry into the Public Investment Corporation, and has launched more than 30 investigations stemming from these hearings.
3,000 The number of Sars employees who have resigned since 2014
SARS HAS ALSO INITIATED A GOVERNANCE REVIEW IN CONJUNCTION WITH THE TREASURY