NOMPU SIZIBA: The South African Revenue Service (Sars) released its preliminary revenue results for the 2020/2021 fiscal year. For the year ended March 31, 2021 the tax collector says it raised a gross amount of R1.54 trillion. However, when taking into account refunds paid of R290.9 billion, the net total of revenue collected was R1.25 trillion. That’s about R37 billion more than was expected in the budget 2021 estimates in February, but down R105.6 billion or 7.8% on the revenue result for fiscal year 2019 to 2020.
To take us through the latest revenue release I’m joined on the line by Edward Kieswetter, the Sars commissioner. Thanks very much Mr Kieswetter for joining us. Now, the tax collection figure for fiscal year 2020 to 2021 was around R37 billion better than was expected in the February budget. This is quite positive, but it’s still some R105 billion down on what you collected in the year prior, and of course it’s largely thanks to the Covid pandemic and its devastating impact on the economy.
EDWARD KIESWETTER: Of course. You will recall that when we made our first estimation of the impact of Covid in June, the view was that we would under-collect by just over R304 billion. When the year progressed, by October we said that value would be closer to R312 billion….
Life happens, and our crystal ball was refined. And so by the end of the year, after lower-end results came in, we noticed a few things.
Firstly, we noted that companies in the mining [sector], specifically platinum and gold, had reported higher sales and they benefited from a rand/dollar exchange in their favour.
And secondly, we saw that financial institutions, banks specifically, which had taken a conservative view of debt write-offs and had provided for that, started writing back some of the provisions because in reality their debt performance was better than they had expected.
Those two factors alone showed us that the recovery was better than expected in those sectors, but then it was balanced by lower than unexpected recovery in retail and in other areas.
So we still have a net negative compared to a year ago, but positive relative to our view that we took round about October.
NOMPU SIZIBA: Absolutely. So how did the major tax draws perform, those being personal income tax, company income tax and Vat?
EDWARD KIESWETTER: What I’m going to do is share with you the performance of those tax types compared to what the minister announced in February, because I think that is the best view we have. For personal income tax we collected R488.6 billion, and that was just short of 1% higher or R4.2 billion higher than we expected.
Secondly, we also found that company income taxes were up 6.5%, and we collected R204.7 billion or R11.7 billion higher. Vat was up 1.9%. We collected R330.7 billion. Import duties were up by 4.9% and we collected R47.4 billion, and domestic-specific excise was up by 7.4% or some R30.7 billion.
So in the big tax sites they were all positive and it is a combination of those economic ups and downs that I mentioned, plus the focus on our compliance activity. We reported that in total we had a 26.8% improvement in the revenue that we collected from our compliance activities, and an 18.8% improvement in fraudulent or inappropriate refunds that we stopped.
So in the R1.25 trillion there will be R158 billion that would not be there were is not for the vigilance and the work of Sars.
NOMPU SIZIBA: Still on that, we understand of course that Sars proactivity in collecting revenue aided in getting that little bit extra. And of course you overhauled your revenue-collection strategy and re-instituted business units that had previously been shut down. How much of a game-changer has that been for you in terms of your collection?
EDWARD KIESWETTER: Well, if you had listened to me today, I would have said it is too early to declare victory, but we are beginning to see the early signs of success, thankfully. And today in the results that we announced, if you go to the detail of the announcement, you will begin to see the difference that the large business centre is beginning to make,
…and you’ll be able to see, just generally, our improvement in compliance in over 1.6 million taxpayers that we’ve registered who were previously not registered, a number of audit and investigative activities that have produced additional revenue, and an additional focus on custom seizures.
So it is not one silver bullet. It is a number of activities with the additional focus that’s beginning to show the results, and that’s the work that we will continue to build. And as we build that work, we will see the compliance environment improve, and the tax revenue collection will follow suit.
NOMPU SIZIBA: During the height of the economic impacts of the pandemic, particularly the second quarter of 2020, a lot of tax relief was given, albeit temporarily. Have all the deferred tax payments that you guys granted taxpayers since been paid back?
EDWARD KIESWETTER: From the work that we have done, all of those obligations have largely been honoured.
NOMPU SIZIBA: You refer to the revenue results that you’re giving us today as preliminary; what processes need to take place before you give us the final definitive revenue number?
EDWARD KIESWETTER: The finalisation and auditing of those accounts. But the numbers we announced are largely the final numbers, but there may be slight rounding off once the accounts are finally reconciled and audited.
NOMPU SIZIBA: You’ve told us a lot about investment in technology, in data specialists and so on, in order to get ahead of people who want to do fraudulent things around tax. Of course you got some financial support from Treasury again in the national budget in February. Where are you going to be applying the additional funds that you now have?
EDWARD KIESWETTER: Well, again, in the three areas that we have mentioned. The first is expanding and increasing our data science and analytics capability, because today we have so much information and you need super-computers to collect and connect the dots.
Then, in terms of expanding our digital footprint, it’s very important that we are able to deliver more and more of our web online digital platforms. And then then very, very specifically in specialised areas of auditing and investigative work, specifically in the areas of the large business, transfer pricing, date erosion tax, the wealthy complex structures of individuals, as well as in the areas of customers.
NOMPU SIZIBA: And then lastly, commissioner, what’s your expectation for revenue in the fiscal year 2021?
EDWARD KIESWETTER: Again, the minister has announced the estimate for now. We will work hard to honour that. But as the reality materialises to the extent that there may be big variables in the assumptions that change our economic growth, the minister obviously will have the opportunity to review that in October.
NOMPU SIZIBA: Excellent. That was Edward Kieswetter. He’s the commissioner of Sars.