Sars poised to fall short in tax revenue collection
Serious implications for all South Africans if the agency doesn’t meet target
THE DEADLINE for 2019’s tax season is December 4, which is less than a month away, so it’s time to focus on your tax returns.
Last week, Finance Minister Tito Mboweni confirmed during his Medium-Term Budget Policy statement that South Africa was facing yet another large tax revenue shortfall.
Projected tax revenues grew by only 3.7 percent this year but the National Treasury was budgeting on growth of 10.4 percent to meet its budget commitments.
Marc Sevitz, a tax expert and co-founder of TaxTim, says: “South Africa is facing a dire tax collection crisis with implications for every South African if this does not improve.
“Since April 2014, the SA Revenue Service (Sars) hasn’t met the National Treasury’s tax collection target. Experts forecast that at the end of March next year, Sars will miss a tax collection of up to R60 billion, the largest collection shortfall to date. This would take the total tax collection missed over the past six years to R215bn.
“Sars needs to ensure that the budget deficit is reasonable and for the country to function optimally, Sars needs to ensure that enough revenue is generated through tax collection.”
At the end of August, figures from Sars showed that it has only managed to collect 39 percent of the target, and for the 2019/20 tax year the agency has only managed to collect 37 percent. Even though the government had opted for a value-added tax (VAT) increase of 1 percent, the larger budget deficit expected is more likely to result in a credit rating downgrade.
What does it mean for you if Sars doesn’t meet the tax collection target?
◆ Increased taxes for everyone. If Sars doesn’t collect the money that the country needs, you may be asked to pay more tax because the government has to plug the deficit.
Personal income tax and VAT increases are ways for the government to recuperate the money that has not been collected by Sars. Instead of only impacting those who default on paying their taxes, everyone is affected.
◆ Weakened rand. An increased budget deficit and weakened economy will result in a weaker rand, which means that food will become more expensive, along with fuel and consumer goods.
Other products that are dependent on imports and global pricing will become more expensive too. For instance, South Africa relies heavily on the importing of wheat, which means that products such as bread, pasta, cereal and processed meat will most likely increase in cost too.
◆ Electricity price hikes. As Eskom relies on diesel to keep the lights on during load shedding, this becomes more expensive every time the rand takes a dip.
For Eskom to keep up with the cost of diesel, the most effective way to recover the loss is to increase the cost of electricity. In the event of a ratings downgrade, this could result in larger interest payments on the large Eskom debt. This could mean larger electricity price increases or even the need for the government to provide another bailout to Eskom. This could also lead to tax increases to pay for this.
◆ Sars clamp down. Sars is clamping down on non-compliance this year. If you fail to submit a tax return, Sars can charge an administrative penalty, which can range from R250 to R16 000 a month, or R3 000 to R192 000 a year. Besides the penalty, you can also expect Sars to add interest to outstanding tax debt. This means that instead of paying the amount due to Sars, you’ll be spending more simply because you haven’t paid.
Sars can legally deduct money due directly from your bank account. So instead of waking up one day to a mysterious deduction that you need to dispute or enquire about, simply pay your taxes, on time.