SARS in big push to halt R100bn slide
Moves to ‘tweak’ operating model
THE South African Revenue Service (SARS) is trying to repair its relationship with SA’s largest businesses as it seeks to reverse a slide in tax collection that has cost the country about R100-billion over the past four years.
The organisation is looking at “tweaking” its offering after nowsuspended commissioner Tom Moyane disbanded the Large Business Centre more than two years ago.
That was part of an extensive restructuring that Moyane undertook after former president Jacob Zuma appointed him in 2014.
Mark Kingon, who has been acting commissioner for eight weeks, told Business Day he would not be reversing the new operating model. However, the model needed to be “tweaked” in key areas such as large business to improve service delivery and boost revenue.
An announcement would be made soon, he said.
Revenue collections have fallen short of budget targets in each of the past four fiscal years. The cumulative shortfall was bigger than the 2018-19 budgets for police and education, with both at just less than R100billion.
Large businesses account for about two thirds of corporate tax revenue of R218.6-billion.
Kingon is quietly going about fixing SARS and restoring its credibility while President Cyril Ramaphosa and Moyane are battling it out. Moyane faces a disciplinary hearing on several counts of misconduct and fraud, after he rejected a settlement offer and refused to resign.
Large businesses are crucial to SARS not only in terms of the corporate income tax they pay, but also because of the “agency taxes” – PAYE and value-added tax – which they collect from employees and customers.
The tax authority has been particularly concerned about the decline in compliance in these taxes. Moyane’s new operating model, which was designed in consultation with management consultancy Bain at an estimated cost of R150-million, led to far-reaching changes at SARS, some of which Kingon said had been necessary.
“There are areas in which the model needs to be tweaked. The priority is to ensure SARS is well managed and that we do the right thing,” he said. “Staff morale has suffered and we want to restore it.”
Kingon said he was committed to finding ways to reduce the cost of compliance across the board. “The cost should not be so onerous,” he said. “We have to serve our clients better.”
He would not comment on Moyane’s disciplinary procedure, except to say that SARS had noted the steps taken by the Presidency and the reports on the charge sheet.
“We continue to operate and to collect taxes.”
Another priority for Kingon will be to close gaps in the collection of excise taxes and customs duties and tackle illicit flows. Tobacco industry sources estimate as much as R4billion a year of revenue is lost to illegal cigarette trading. SARS officials acknowledged to parliament last week that the agency had not done enough.
There are gaps in the monitoring of SA’s borders. SARS plans to make customs officials more visible at airports and border posts as well as closing loops which enable illicit financial flows.
That includes the practice of “round tripping”, used to get money out of the country.
“We will work with the banking sector to find ways to close the loop,” Kingon said.
Where the Large Business Centre used to provide an integrated, onestop service, it had been broken up into its component parts, in a move which tax experts say undermined SARS’s relationships with its large clients and its specialised capacity to collect from them.
Kingon said revenue from large businesses could have been flat because of the economy, “but we don’t know”.
SARS will also be looking to expand the dedicated unit serving high net worth individuals, which used to be part of the Large Business Centre.