The Commissioner for the South African Revenue Service (SARS), Mr Edward Kieswetter, reaffirmed the organisation’s commitment to supporting Finance Minister Mr Enoch Godongwana’s strategy for fiscal consolidation over the medium term. “A well-functioning tax administration within a growing economy is the most sustainable path towards improving the country’s fiscal integrity,” said the Commissioner.
He said this after the Minister delivered his final Budget Speech of the 6th administration of South Africa’s democracy, which celebrates its 30th anniversary this year, following the historic democratic elections of April 1994.
Mr. Kieswetter said that, since its inception in 1997, SARS has played a pivotal role in supporting South Africa’s democracy by collecting over R19.5 trillion in revenue for the fiscus. Tax revenues make up over 90% of government’s consolidated budget revenue that allows the funding of the programme of building a capable state that serves the needs of all citizens. “In particular, we take pride in the fact that, through our work, the provision of social grants, schooling, healthcare, public transport and others have a transformative impact on the lives of the most vulnerable,” he said. He added that maintaining crucial partnerships between SARS and its stakeholders is the social compact between government and citizens to deepen their fiscal responsibility.
The SARS Commissioner added that, to maintain tax revenues at the current level or increase them, it is essential to improve fiscal integrity, in particular, to reduce the need for debt and debt service costs. A focused compliance programme, as well as improved taxpayer and trader compliance underpin fiscal sustainability and consolidation.
Taxpayers must meet their obligations to register, file and pay their tax. Those who fail to comply place an unfair burden on honest complaint taxpayers and must face the consequence of breaking the law.
“In this way, we are all nation-builders and guardians of our hard-won democracy for the next 30 years,” Mr. Kieswetter said.
The SARS Strategic Intent is to promote voluntary compliance and fiscal citizenship through implementing key strategic objectives: Provide clarity and certainty about tax and customs obligations, making it easy and simple for taxpayers and traders to comply with their tax obligations and making it hard and costly for those who willfully do not comply.
This forms the basis of the compliance initiatives implemented by SARS over recent years, which have contributed R210.3 billion year to date. These compliance efforts represent an extraction rate of 15.2%, up from 12.4% in the previous year, showing year-on-year growth of R43.4 billion (26.0%). Cash receipts emanating from these efforts amount to R124.7 billion, up from R105.1 billion in the previous year. Leakage prevention measures delivered R85.6 billion, up from R61.8 billion in the previous year.
The key contributing tax products include VAT: R86 billion or 41%, Corporate Income Tax (CIT): R41 billion or 19%, Personal Income Tax: R39 billion or 18%, Customs: R15 billion or 7% and Dividends Tax: R15 billion or 7%.
When economic growth is strained, SARS has to work harder to ensure that all taxpayers remain compliant and up to date with their taxes. The focused Compliance Programme is the centrepiece of our active engagement with taxpayers and traders. This work continues to complement tax revenues, which would otherwise be much lower under these economic conditions. The largest contributors to our Compliance Programme year to date are:
- Focused compliance initiatives in the Large Business and International segment yielded R17.2 billion, up by R15.7 billion from the prior year.
- Following up defaulting taxpayers to collect outstanding Debt, which amounts to R70.3 billion, up 16.7%, which includes:
- Enforcement actions in Syndicated Tax and Customs Crimes, which delivered R13.5 billion, up 246%;
- Efforts to prevent revenue leakage secured R85.6 billion, up 38.5%;
- Customs and Excise interventions, which resulted in R12.7 billion, up 22.1%.
SARS is implementing additional measures to sustain and even increase compliance revenue.
The Commissioner said that, for the remainder of the fiscal year ending on 31 March 2024, SARS has put in place measures to reach the revised estimate for revenue collection of R1 731.4 billion announced by the Minister today.
Mr Kieswetter also said that SARS will continue to support government’s fight against unemployment, poverty and inequality within the context of a prudent and stable fiscal framework. The ever-increasing refund amount against which R352.6 billion were paid to date serves to contribute to desperately needed resources to help stimulate the economy with concomitant benefits for households, companies and the fiscus. Despite these laudable efforts, it must be accepted that the economy is growing extremely slowly, which is restricting healthier revenue collection. It is expected that severe risks will continue to impact revenue collection negatively.
The above is compounded by the global and local economic outlook that remains fragile, exacerbated by the ongoing conflicts in Eastern Europe and the Middle East. Load shedding continues to be a burden on the profitability of companies, and the country continues to experience inefficiencies at the main seaports, affecting optimum trade. While imports may be up as a result, they are nowhere near being enough to compensate for companies’ profitability, which plays a vital role through CIT. Despite mining facing continued pressure, there are other mining activities such iron ore and chrome that are seeing positive uptick.
Year-to-date revenue is under pressure when measured against the Medium-Term Budget Policy Statement estimate of R1 730.4 billion.
However, there are reasons for cautious optimism. February is a high-collection month as companies are due to submit and pay their CIT Provisional Tax returns. Apart from normal revenue flows, many taxpayers seek to regularise their tax affairs with SARS before the end of the accounting period.
Furthermore, March is also a high-collection month as high-value CIT Provisional Tax payments are expected, mainly from large business and international companies.
SARS will work even harder to carry out its revenue collection mandate in pursuit of its Higher Purpose, which is to collect all revenue that is due to enable government to build a capable state that serves the citizens of our country and facilitate legitimate trade.
“All this extraordinary work is achieved by 12 500 SARS staff who are single-mindedly driven by a duty that is beyond and above them. I salute all of them, firmly confident that what the Minister announced today will be pursued with unwavering commitment,” concluded the Commissioner.
