R50bn shortfall for SA Revenue Service
PROBLEMATIC: SIGNIFICANT CHUNK OUT OF SOUTH AFRICA’S REVENUE
Sars commissioner Kieswetter is trying to get tax collection targets back within reach.
Commissioner is trying to get tax collection targets back within reach, but it looks certain to take him a while.
By the end of August, the South African Revenue Service (Sars) had collected 37% of the total tax budget for the 2019-20 year. By the same point last year, it had reached 39%.
This suggests the organisation is going to have a hard time reaching its tax collection targets.
Momentum Investments economist Sanisha Packirisamy said: “Extrapolating tax receipts year to date points to a R97.9 billion shortfall in tax revenue for the full year 2019-20. But after taking account of seasonality and a normalisation in VAT [value-added tax] refunds, the shortfall falls to around R50 billion.”
This would be a significant chunk out of the country’s revenue.
Cause and effect
Undoubtedly, SA’s weak economic growth is affecting how much tax Sars is able to collect.
It is, however, difficult to know how much should be ascribed to this and how much is due to Sars still struggling to reconstitute its operations after years of mismanagement.
As the Commission of Inquiry into Tax Administration and Governance at Sars, chaired by retired judge Robert Nugent, found last year, “integrity and governance” at the organisation had failed under its previous leadership.
Nobody should be under any illusions that this and the degradation of capacity it led to, can be corrected quickly.
Honest assessment
National head of taxation at Mazars Mike Teuchert said: “[New commissioner Edward Kieswetter] has made no bones about the fact that his organisation is not in a good state. He has been given a bit of a broken organisation and staff morale is extremely low.”
Unfortunately, this has led to many capable people leaving the revenue service in recent years. This has meant a meaningful loss of experience.
“Kieswetter recently highlighted that there is an understaffing at Sars of about 1 000 people, of which 600 are very critical to the collection process,” said Teuchert.
One of the commissioner’s key tasks, therefore, is restoring Sars to full capacity.
“Kieswetter has indicated that he is quite keen to poach staff from the private sector. He has to pay attention to having the right people on the bus in the right seats,” says Teuchert.
Another key aspect of the turnaround is making it easier for people to be tax-compliant. A big part of that is optimising the use of technology.
“So, Kieswetter is looking at initiatives to make being a law-abiding taxpayer easier. That would more than likely mean making the eFiling system more adaptable, more user-friendly and more responsive. At the moment, it is quite unwieldy,” Teuchert says.
Restoring faith and trust
Perhaps most critically of all, Sars needs to regain the confidence of taxpayers.
One of the ways in which Kieswetter is trying to correct this is through re-establishing the Large Business Centre, which deals specifically with large corporates and high net-worth individuals.
Fortunately, the commissioner appreciates the task he is facing.