No increase in tax rates

Sars Commissioner Edward Kieswetter explains how the higher revenue collections came about, including through improved performance within the revenue service.

FIFI PETERS: The main reason why the finance minister was so kind to us this year – not raising personal income taxes and also reducing the corporate income tax rate – was because of the much higher revenue collections than initial estimates from Sars [South African Revenue Service]. That’s R182 billion higher to be exact.

We have Sars Commissioner Edward Kieswetter joining the Market Update. Edward, thanks so much for your time. Most of the R182 billion has come from the mining sector, but can you give us a split of the mining sector’s contribution and the contribution from other sectors?

EDWARD KIESWETTER: First of all, let’s just take a step back, Fifi. The overperformance is projected to be about R182 billion. Our estimate is that about a third of that comes from the economy, whereas the two thirds comes from the compliance work done by Sars. That’s an important split between the revenue and what some media are calling a ‘windfall’ or a ‘mining bonanza’. Most of the revenue performance is actually coming from improved performance through the work that Sars does.

FIFI PETERS: But can you then paint the picture regarding the mining sector and other sectors’ contribution, given that it was referred to by the finance minister himself?

EDWARD KIESWETTER: Sure. The minister mentioned two points. He didn’t give specificity around it. He mentioned the performance in the economy and he also mentioned the work of Sars. I’m happy to talk to you about either.

Specifically, what we have seen from the economy – we’ve seen a few things. First of all we know that the projections at the time of the February announcement had pencilled in the GDP number, nominal GDP, which last year was minus 7.2% or nominally minus 2.1%. The actual GDP performance this year is 12.3%, so quite a significant a rebound from a low base driven by a few things.

One, we see the export from the commodity pricing cycle, both production and sales, really lifting up after the hard lockdown measures experienced.

We’ve also seen in terms of trade taxes there has been a 21% year-on-year growth in terms of trade taxes from the sector, which is generally across all of these sectors; in the exports the growth was 23.7%, and this was driven largely by commodities, by vehicles and by necessity goods.

So there’s a little bit of contribution from all pockets of the economy. The largest contribution has come from particularly the platinum and gold mines, and those have benefitted from higher prices and improved sales.

FIFI PETERS: All right. Perhaps then let’s touch on the compliance work that Sars has done, which you say has also contributed to this revenue overrun. Exactly what was done to strengthen the level of compliance this time around?

EDWARD KIESWETTER: Thank you for that question. Let’s pick one or two areas by way of example. I don’t know how much time you have, but let me give one or two examples.

In criminal and illicit economic activities we have seen quite a proliferation of criminal activities over the last number of years. We know about the work that has been done by the Zondo Commission, but generally the proliferation of crime in South Africa has had a huge impact [not only] on the economy but also on tax revenues.

We have in one area, looking at syndicated crime, the kind of criminal activities that Zondo would’ve looked at.

This year we finalised 650 investigations raising assessments worth just over R11 billion, and we have issued 12 preservation orders and seized assets to the value of R5.5 billion.

We have just completed tax inquiries in the gold sector. During the pandemic alone we seized 300 million tobacco sticks valued at over R350 million, and just yesterday [Tuesday] added another R80 million to that when we conducted a further raid. We’ll be issuing a press statement on that. We cancelled the licensing of the clearing agents that imported illicit tobacco and liquidated another, and referred eight criminal cases to law enforcement.

I can also share with you that, through the current investigative work we have done, we have referred 220 cases to the NPA, the National Prosecuting Authority, which included 43 cases involving PPE, personal protective equipment. Of that, 113 guilty convictions were obtained, of which 11 are in terms of PPE. That would’ve resulted in prison sentences, in suspended sentences, and in financial fines, as well as in orders to the individuals to repay money to Sars.

We have had only three acquittals of the 220 cases that we handed to the NPA so far.

We can also share with you that, in terms of the work we do in our voluntary disclosure programme, we have added just short of R4 billion. The compliance work we do in the [Sars] Large Business Centre has contributed R4 billion in terms of custom seizures, false declarations, and the detection of trade mispricing has raised R5.8 billion. I can carry on.

In terms of debt collections, R50 billion in terms of refund fraud. We have prevented the outflow of R30 billion of potential attacks on our refund system, and this comes from doing work with data and artificial intelligence through our risk engine.

These are just examples of work done by Sars that secures revenue due to the state which, if the work were not done, would otherwise not be collected by the state.

FIFI PETERS: All right. Commissioner, thanks so much for making that a picture a little clearer. We’ll leave it there, sir. That was Sars Commissioner Edward Kieswetter.



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