The acting commissioner of the South African Revenue Service (Sars) is having sleepless nights about the ambitious tax revenue target he has to meet in the current financial year.
The target of R1 345 billion is more than 10% higher than the preliminary amount Sars collected in 2017/18 and will have to be raised during a period of low economic growth and as the Nugent Commission of Inquiry continues its probe into tax administration and governance problems at Sars.
“The [tax revenue target of] 13-45 [billion rand] is giving me sleepless nights,” said Mark Kingon at the launch of Tax Season 2018. Filing season, which is 18 business days shorter than usual, officially started on July 1. Most individual taxpayers will have to file their returns by October 31.
Kingon said that while there were various efforts under way to ensure Sars reached the target, it was not something he could guarantee.
Finance minister Nhlanhla Nene said he is confident that Sars will be able to reach the target. National Treasury understands the problems facing the economy, but improved efficiency, compliance and integrity of the system could go a long way in overcoming the tax gap.
Sars is working to restore public trust and credibility after a turbulent period during which the Tax Ombud found that it unduly delayed refunds in certain cases. The revenue authority has also been accused of aiding the state capture project and commissioner Tom Moyane has been suspended amid allegations that public trust suffered under his leadership.
Kingon said confidence in the tax system had an impact on revenue collection.
In April, Sars engaged with 14 000 Vat vendors who chose not to pay taxes worth over R1 billion.
“Now that type of behaviour has a significant impact into us being able to achieve the 13-45 [billion rand tax revenue target].”
Kingon said chief officers had been working together to identify similar cases and to call vendors and employers immediately should they fail to make payments.
Although it’s still early days – the first quarter of the financial year has just ended – Sars is already trying to identify revenue gaps.
“Company income tax I have got concerns [about] specifically,” Kingon said.
Sars is also looking at the impact of the one percentage point adjustment in Vat, and how other policy changes might affect the revenue target.
The acting commissioner warned that Sars would continue to issue penalties for late submission of returns and that perpetrators would ultimately be prosecuted. There are still cases where taxpayers who haven’t submitted returns for up to 37 months choose to pay a penalty rather than file a late return.
“One just wonders what people are hiding in those tax returns … We have to start prosecuting people who just wilfully continue to disobey the laws of the land. No matter what excuses can be advanced, to not file a return for 37 months is a shame.”
Kingon added that a significant portion of Sars’s debt figures relate to administrative penalties and non-submission of returns. A meaningful number of people simply choose to ignore their obligations.
Many people are operating below the radar. Against this background, Sars has launched a specific initiative aimed at “prominent business individuals” who may have up to 200 different entities in their stable – trusts, companies and individuals – and where it has identified “non-compliance on a grand scale”.
Kingon said the chief officer of enforcement, Mogola Makola, is currently reconstituting teams to deal with the broader illicit economy, which includes the tobacco trade.
“You need a specific mindset to be able to dig out the criminal activity that is being conducted with the sole focus of defrauding the fiscus,” he said. “We cannot allow it to continue.”
Kingon also launched the long-awaited Service Charter, which sets out the minimum levels of service and turnaround times taxpayers can expect.
The previous charter, which was issued around 2007, has effectively been non-operational since Sars moved from manual to electronic business processes.
In terms of the charter, the Sars Contact Centre will endeavour to answer calls within four minutes during peak seasons (such as tax season) and one minute during off-peak seasons. Further, Sars aims to pay refunds above R100 for the current filing period within seven business days of finalising the final assessment (provided no other debt is outstanding, all obligations have been met, administrative control processes are adhered to, and no inspection, verification or audit is required or has been initiated).
Kingon said Sars is committed to the timelines, but in certain cases it might not be able to adhere to them due to capacity constraints. Early on Monday, roughly 800 people were standing in line at its Vereeniging branch.