Return of the taxman
Efficiency improvements at Sars helped to raise taxpayer compliance and contributed to a take of R1.56-trillion
SA Revenue Service (Sars) commissioner Edward Kieswetter was in a celebratory mood last week when announcing a 25% increase in net tax revenue on the previous year, a significant portion of which was due to restoring efficiency at Sars after the state capture damage (he argued).
In the fiscal year ended March 31, Sars collected a net R1.56-trillion, R314bn more than the previous year.
It is R16.7bn more than the government was expecting at the time of the February budget, just a few weeks ago — something that earned praise from finance minister Enoch Godongwana, who committed to ensuring that Sars remains well capacitated in the interests of fiscal integrity.
Granted, the improvement was due mainly to SA’s economic rebound from the pandemic, which was boosted by high commodity prices, leading to robust corporate income tax (CIT) receipts. VAT and personal income tax (PIT) collections were buoyed by expanded social assistance, pent-up demand and tax relief measures.
PIT was up R67bn (13.8%) to R556bn on the previous year, followed by VAT up R59.5bn (18%) to R391bn and CIT up R119bn (58.3%) to R324bn (see table).
Kieswetter believes that almost R210bn, or 13.4% of the R1.56-trillion collected, is due to administrative improvements at Sars that have raised payment compliance by 4.2% for CIT, 1.4% for VAT and 1.8% for PAYE.
“It’s too early to declare victory,” he said. “We have a long way to go, and still drop the ball far too often, but it’s important to appreciate the progress already achieved.”
For instance, most of the Nugent commission’s recommendations to address governance failures at Sars have been implemented. In addition, its IT infrastructure and customs division are being modernised, additional skilled staff employed, and work to combat illicit activity intensified.
The decision to relaunch the large business & international unit closed by former commissioner Tom Moyane has been vindicated. It dealt with 345 cases of transfer pricing, base erosion and profit shifting, yielding almost R12bn. This helped it to raise R111bn more in revenue year on year (y/y) from this segment and push compliance 3% higher to 92%.
Similarly, the new high wealth individuals segment raised R265m more y/y and improved compliance by 4% to 92%.
Kieswetter said the small business segment still “has much work to do”. Even so, it increased revenues by R204bn (23.6%) y/y with payment compliance in
creasing by 2% for PAYE and 1.6% for VAT.
At the same time, Sars paid a record R321bn in refunds — 10% more than last year and equivalent to 5% of GDP, reflecting how important it is to process refunds expeditiously to get cash back into the economy.
Sars also finalised 1,635 applications to the voluntary disclosure programme, yielding R3bn in cash and preventing impermissible refunds worth R865m.
Kieswetter described SA as “a society sick with corruption”, revealing that Sars prevented R70bn in impermissible outflows over the past year, of which the biggest component was VAT fraud.
Sars was improving its engagement with honest taxpayers and its ability to crack down on the negligent or criminal ones, he said.
Its 270 specialised auditors conducted 25 lifestyle audits, targeting individuals whose lavish lifestyles did not match their tax declarations. There were 33 cases relating to luxury-vehicle ownership that yielded R160m; 35 cases where religious institutions misrepresented their income and expenses, yielding
R742m; 32 cases of tax abuse in the security industry, yielding R682m; and 30 cases of abuse of the employee tax incentive, yielding R245m.
The customs unit undertook almost 2,000 seizures, removing illegal imports worth R3.4bn, and collected a further R2.7bn for various other customs contraventions.
The next step is to act on recommendations from the Zondo commission, said Kieswetter, noting that Sars is working with the National Prosecuting Authority. Year to date, 29 civil and 23 criminal investigations into state capture cases have been finalised and R7.7bn recovered.