The South African Revenue Service (Sars) has defeated the odds by exceeding the revenue collection target set in February last year, and then revised several times because of the global Covid-19 pandemic.
The estimated target of R1.21 trillion was exceeded by R38 billion. The revenue authority collected R1.25 trillion for the tax year that ended on March 31. The expected total tax deficit of R312 billion was reduced to R175 billion.
Sars Commissioner Edward Kieswetter says renewed administrative actions to curb increased non-compliance has resulted in some success.
However, he says it is too early to declare victory. “We are the first to admit that we drop the ball too often,” he said during the announcement of the preliminary revenue outcome for 2020-’21 on Thursday.
The main sources of revenue that contributed to the R1.25 trillion collections were personal income tax, which contributed R488.6 billion (39.1% of total tax revenue), value-added tax R330.7 billion (26.5%), company income tax R204.7 billion (16.4%) and customs duties which contributed R47.4 billion (3.8%).
Personal income tax collections improved by just under 1%, company tax improved by 6.5% and VAT by 1.9% on previous estimates. Industries that contribute to excisable products had a net decline year-on-year across all taxes of R21 billion (33%). The under recovery from tobacco and alcohol alone was R14 billion.
Kieswetter says administrative actions to improve compliance in terms of all tax types are critical to ensure the best revenue outcomes for the country.
Sars has concluded several civil and criminal cases and 27 criminal cases relating to state capture investigations are currently with the National Prosecuting Authority.
The tax authority has been able to secure nine preservation orders with assets valued at R5.5 billion.
Investigations into the non-compliance of suppliers providing PPEs are ongoing and have to date resulted in undeclared revenue collections of R135 million, refunds were reduced by R47 million, and Sars obtained preservation orders for assets worth R88 million.
Kieswetter also announced the identification of “30 politically-exposed persons”. Investigations into their affairs are at various stages.
Sars has also been able to expand the tax base by 1.6 million newly-registered taxpayers, mainly in pay-as-you-earn (PAYE), VAT and personal income tax.
This yielded R5.8 billion and, after refunds of R1.47 billion, Sars collected revenue of R4.4 billion from these new taxpayers.
Tax debt of R63 billion has been collected in the period under review, of which R12 billion was collected from large businesses. It collected another R16 billion from provisional taxpayers who under-declared their estimated income.
Due to greater diligence in potential refund fraud, Sars prevented refund leakage of R57 billion.
Keith Engel, CEO of the South African Institute of Tax Professionals, says much of the figures announced by Sars are in line with what Finance Minister Tito Mboweni alluded to in his February budget.
The impact of the coronavirus pandemic has been less than expected and several sectors including manufacturing, mining and trade rebounded when the economy was given breathing space in the third quarter of last year.
He says the administrative efforts embarked upon by Sars under the leadership of Kieswetter must be commended. “He has been quietly rebuilding the institution and getting it back on its feet again. However, it still has some way to go.”
He says despite the efforts, Sars is still under-skilled and needs to strengthen its forensic investigation teams to the level they were at before the state capture years.
“Sars is on a hiring spree”, notes Engel.
Kieswetter has vowed to continue with efforts to rebuild Sars and to regain the trust of taxpayers in the institution. He says its focus will unashamedly remain on corporates and high net worth individuals who have, according to him, the greatest ability to avoid their tax liability through under-declarations of income and sophisticated tax structures.
Through the current automatic exchange of information agreements with other tax authorities across the globe Sars is aware that South African taxpayers hold around R400 billion in offshore accounts.
With the initial introduction of the Voluntary Disclosure Programme more than 3 000 taxpayers responded. Sars was able to identify 10% of these offshore assets, collecting around R4 billion.
There will be an increase in reconciling information from third party data sources such as Natis, the deeds office and financial institutions with the declarations from taxpayers to see what their true wealth and true tax liability is.
Kieswetter says retired judge Dennis Davis will be working more closely with Sars to ensure that the recommendations by the Davis Tax Committee are implemented.
Listen: Sars commissioner Edward Kieswetter discusses the preliminary revenue results for the 2020/2021 fiscal year