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Sars: No quick fix for legacy of ‘disastrous’ few years

Revenue authority undershoots collection estimates as growth disappoints, compliance slips and internal challenges persist.

Weak economic growth, lower compliance levels, efforts to reduce the Vat refund backlog and internal challenges have seen the South African Revenue Service (Sars) miss its revised revenue collection target by R14.6 billion.

Sars announced on Monday that it collected a preliminary R1 287.6 billion in the financial year through March, R14.6 billion less than its revised estimate of R1 302.2 billion. Its collection efforts undershot the 2018 budget speech estimate by R57.4 billion, the biggest deviation from the printed estimate since the global financial crisis.

“Yes, I think the number in terms of the deficit is a bit of a shock,” said Mamiky Leolo, acting group executive of the Tax, Customs and Excise Institute at Sars.

But Leolo said context is important – while it statistically undershot the revised target by 1.1%, Sars had done a good job under very tough circumstances.

Former commissioner Tom Moyane was fired in 2018 after the Nugent Commission of Inquiry found that there was a failure of governance at Sars under his watch. President Cyril Ramaphosa appointed former Alexander Forbes executive Edward Kieswetter as new commissioner last week. Kieswetter will join Sars on May 1.

Recovery will take time

Ismail Momoniat, head of tax and financial sector policy at National Treasury, said the legacy of the last few years will take time to reverse.

He estimates that it will take about two years to fix Sars, after the disastrous period it experienced between 2014 and 2018.

Sars re-established its large business centre and illicit economy unit in 2018, and raids have started taking place.

All these things had to be done, Momoniat added.

“Why they weren’t done the last four bad years, I don’t know. I can guess. Part of the state capture story. Recovering from that is not instantaneous and I think that is just an important point to note when we look at these numbers, but fixing up Sars I think is on track and as we fix up Sars the capacity to collect should improve.”

Momoniat said while the outlook was worse than Treasury projected, one had to bear in mind that Sars has started to address the Vat refund backlog. 

“If [Sars] continued with the practice before, it would have reached its target. In fact, there seems to have been lots of artificial playing around to try and make sure the target was reached.”

Debt book up R14bn

Acting Commissioner Mark Kingon said Sars’s debt book grew by roughly R14 billion to R145 billion.

“That is of deep concern to us and we need to find ways in which we can continue to reduce that debt book.”

Kingon is also worried about the pipeline of audits, settlements, and appeals within the audit pipeline in the large business centre.

“We have seen a significant decline in this area over the last few years. We need to continue [to] focus in this area, because this is the area where transfer mispricing is happening. Base erosion and profit shifting is happening. We need to be on top of our game in this space insofar as doing audit work in a professional and speedy way.”

eFiling system gets R225m upgrade

Kingon said that while much criticism has been levelled against the Sars IT department in the past year, R225 million has been invested into a new eFiling infrastructure, which is in the test phase and should be up and running after the Easter weekend.

A slip in compliance has also been an issue. Leolo said filing compliance with regards to PAYE slipped from 83.9% in 2008/09 to 68.9% in 2018/19. Filing compliance with respect to Vat dropped from 79% to 61.7% over the same period.

Kingon said there is significant opportunity for automation and for technology to be used to Sars’s advantage in collecting revenue. 

“Third-party data is the way of the future. We have to use big data to be able to collect our revenue.”

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That is what happens when you put an illiterate goat herder in charge of the country. He appoints other people of his own calibre in senior positions with disastrous consequences. All this so that we can say that for the first time in the history of this country, we had a Zulu president.

To move forward we need to stop making comments regarding anyone’s race. South Africa needs positive people.

@BenK. How I wish to share your sentiments. However, my dreams that SA can be a beacon in Africa has died in the last 5 years. All this populist rhetoric by our incompetent parliamentarians does not help.

When there is a concert or sports matches (ala middle class); the vibe is different; there is fun and hope.

@benK-truth hurts.ANC and other parties are making everything about race.BBEE,election etc. Maybe you have missed some BLF and EFF comments ??Soon as that stops the the race issue will vanish.

The ANC have strangled the golden goose a long time ago and she is on her last legs.

Can the new SARS head help protect the SA economy from the ANC?

I’ll stick to saying “One swallow doesn’t make a summer” till proven wrong.

Apart from the mismanagement at .SARS in the last few years…we need to also take into account the expectation created by the enormous CGT event on the sale of SAB.
In my opinion, the Zupta fiasco should also be more widely factored into SARS demise…Corporate SA and ordinary taxpayers have become resistant to honest dealings with government institutions in reaction to what they see is happening from the top. Hopefully this has now been addressed and SARS can again enjoy a reputation as a fair and ethical institution. Getting revenue in from illicit cigarette operators will be a good start!

Contrast the efforts made to restore the efficiency and integrity of SARS with that of every other government department and the ANC priority is clear: a great tax collector to bleed the country further, with more billions to be pumped into flab and cellulite.

Could someone explain this please?

“Third-party data is the way of the future. We have to use big data to be able to collect our revenue.”

Which 3rd party would have data on companies, profits etc of every business in the country?

Debt book of R145 billion ? That’s 1/3 the size of ESKOM’s debt and 10% of total tax collected for 2018. Is this counted as part of SA’s total debt?

What the heck! SARS another failing SOE?

I think what they mean is SARS will rely on what are effectively tip offs from Mauritius, Jersey, Panama etc to selectively (half of the tip offs will relate to ANC cadres I guess, who will continue to go off scot free) extort tax from.

The absolute arrogance of SARS, who, to a man/woman, threatened, intimidated and hounded mostly honest taxpayers for probably 15 years to whine about “legacy” is the hallmark of the ANC apparatchik from Ramaphosa down.

SARS will be restored to integrity when we see Zuma being taken to court for non-payment of the fringe benefit tax on his R250m home improvement; when we see the famous cigarette dealer in whose house Julius’s wife resides for non-payment of donations tax; Ace Magashule for all the millions of undeclared income; etc.

SARS is broken, and all the PR in the world will not fix it.

If there is ever another revolution in SA, I know which buildings I’m setting fire to. Right after I’m done with the banks.

My work today was cancelled due to the strike at SARS. Crucial prosthesis sitting at customs. Patient stressed.
Thanks SARS for the day off.

Customs, another arm of the regime. Prosthesis and most medical equipment should never have customs or excise!

Quite a lot has been said about SARS in the past few years. I fear SARS but do not respect them. Fear because I saw what they do to people and it’s like a lam being led to the slaughterhouse. No respect because they don’t apply the same rules and regulations to everybody. To this day if you owe SARS millions, you will find somebody that you can bribe and you can get away with it. Yes, I can prove it. I must honestly state that being an accountant in the SME sector, I’ve tried my utmost to at all times ensure that my clients are compliant in every way and in terms and in relation to all taxes and rules and regulations. However, these same SMEs have to compete against larges companies that do not comply in all respects. The differences are so huge that it’s not even relevant to refer to one playing field, let alone a level one. Corporate South Africa operates on at least two different playing fields. Worst part is that if you do get somebody that should listen to you, they’ll send you from the one department to the other and eventually things just die a natural death. Finally, I’m awfully sorry to state this, but this has not occurred only in the Tom Monyane years. I adhere to the tax rules and regulations because it’s the honourable thing to do. However, my clients suffer because they compete in sectors where honour in terms of fiscal responsibility and equal treatment means absolutely nothing. And, don’t get me started on the liquidation industry… This industry is probably the primary cause for the hemorrhaging of vast amounts of tax due but goes unnoticed and uncontrolled because society deems crooks wearing suits differently from crooks wearing jeans

“efilling R225m upgrade” !!! What on earth are we buying ? ALL of intels servers ?? WHY

I wonder who the crazy executive was that signed off on this amount

I regard aggressive tax avoidance and tax evasion as my civic duty, after all one doesn’t give heroin to a heroin addict? They can find me if they can, I’ll take my chances thanks. Just another tentacle of the blood-sucking ANC vampire

This is exactly the attitude we need to follow if we are to make any progress against the criminals that run this country. Cut off the tap that feeds the criminal behavior otherwise we face a very uncertain future.

Yes, there is a quick fix
1 Fire the useless parasites that have been “Deployed”
2 Reverse the ethnic cleansing that chased out SARS’ best and brightest
3 Abolish ANC-connected-so-protected
4 Implement the “Batho Pele” principles
5 Penalise errant tax collectors the same way taxpayers are penalised
That will sort out tax morality, “profit shifting” and “base erosion”

Then fix the economy to generate the wealth that needs to be taxed:
1 Drop outmoded Marxist ideology and “developmental state” fantasies
2 Trust the citizens and businesspeople
3 End state hostility to the productive sector
4 Cut red tape, fee up the markets (including breaking up monopolies) and, in general, fix the (dis)”ease of doing business in SA”

In short, put a moratorium on Corruptheid — vote the ANC out.

A more Democratic and fair way to fix the problem and restore faith in the system by everyone:

1) Follow the criminal law as it is supposed to be applied to every South African. If you steal public or private funds you must be sequestrated, all your assets confiscated and serve a jail sentence.

2) Get the extradition treaty going with Dubai and repatriate the Billions of Rands (Tax payer funds).

Nothing else will restore faith to Tax payers and Business.

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