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Compliance efforts of SARS bear fruit and underpin the positive revenue results despite the tough prevailing economic conditions

Compliance efforts of SARS bear fruit and underpin the positive revenue results despite the tough prevailing economic conditions

2 April 2024 – The South African Revenue Service (SARS) is pleased to announce its preliminary revenue collection outcome for the 2023/24 fiscal year.

SARS was established in 1997 and remains inextricably linked to the country’s democracy, now 30 years old. This link is premised on a pivotal role that SARS plays in fulfilling its legal mandate, often expressed as its Higher Purpose. The organisation is realising its Vision 2020-2025 of a SMART, modern SARS, that can be trusted and admired by all. Since its inception, SARS has collected R21.6 trillion in net tax revenues. Tax revenue collections have increased from R114 billion in 1994/95, at a compounded annual growth rate of 9.9% and an average tax-to-GDP ratio of 22.2%. To put this in perspective, our collections over the last 4 business days this fiscal year amounted to R114 billion or the total collected in 1995 for the entire year.

As at the end of March 2024, SARS collected a record gross amount of R2.155 trillion, year on-year 4.2% against the nominal GDP of 4.9%. SARS paid out refunds of R414 billion to taxpayers, the highest ever quantum in refunds compared to R381 billion in the prior year, representing growth of 8.6%. This brings the collected net amount to R 1.741 trillion which is almost R10 billion higher than the revised estimate and R54 billion more than last year’s R 1.687 trillion.

Just in VAT refunds the amount of R343 billion represents a growth of 7.5% over the  prior year. Total refunds this year, represent about 6% of GDP. It is therefore pleasing that R120 billion and R37 billion of the refund benefit, respectively, were directed to SMME’s and individuals. This is good when business and individuals remain cash strapped.

Whilst we are pleased that the R414 billion returned into the hands of taxpayers is good for the economy, I remain concerned about the refund fraud and abuse” says Commissioner Kieswetter. In the period under review, SARS was able to prevent the outflow of R101 billion of impermissible refunds.

  • Compared to the 2022/23 fiscal year, total tax revenue increased by R54.2 billion (3.2%), driven by personal income taxes of R49.5 billion (8.2% y/y) on the back of higher than estimated compensation of employees, as well as higher domestic VAT of R39.3 billion (8.1% y/y).
  • Net Personal Income Tax, which accounts for 37.3% of total revenue, grew by R49.5 billion 8.2% in 2023/24, as employment improved year-on-year from and average wage settlement rates improved from an annual average of 6.0% in 2022 to 6.3% in 2023. PAYE collections from incentives and bonus payments predominantly from the finance sector, also boosted PIT revenue.
  • Net Corporate Income Tax (CIT) contracted by R31 billion (-8.9%) in 2023/24, while the mining sector saw a decline R42 billion, which is lower than the PY by 49.0%. The CIT contribution of large businesses contracted by 17.5%, while the contribution from small businesses increased by 8.8%. CIT collections accounted for 18.0% of total revenue.
  • Net Value-added Tax (VAT) growth of R25.4 billion (6.0%) is largely attributable to Domestic VAT (up by R39 billion (8.1%), import VAT (higher by R10.0 billion (3.9%) and higher outflow of VAT Refunds R23.9 billion (7.5%).

SARS is determined to make it hard and costly for taxpayers who willfully fail to meet their obligations. The SARS compliance programme contributed R293.7 billion as at end of March (preliminary). This is an increase of R61.9 billion (26.7%) from the previous year’s R231.8 billion.

The Compliance Programme uses data, artificial intelligence and machine learning algorithms to successfully counter criminality and willful non-compliance. These systems also ensure that no legitimate refunds are denied, whilst preventing impermissible and fraudulent refunds. Examples of the successes of the Compliance Programme include:

  • R91.3 billion debt collected from 2.6 million cases, including R420 million from 895,000 outstanding returns.
  • Voluntary Disclosures contributed R3.5 billion made up of 1,435 concluded applications.
  • Where provisional taxpayers, have underpaid their taxes [Paragraph 19(3)], SARS has collected R19.3 billion from over 28 000 cases from Large Business and Individual unit and SMMEs.
  • The Specialised Audits and Investigations contributed stoppage of revenue leakage prevention of R5.7 billion whereas Audits from LBI Segment contributed R23 billion from 341 cases.
  • The Investigations of Syndicates Crimes contributed R20.1 billion and executed 147 Preliminary investigations made up of preservation orders and collapsing one (1) tobacco and gold Illicit Financial Flow scheme.
  • Completed 230 000 Customs Compliance Inspections and Interventions compared to the prior year 235 000 inspections. A total of R8.4 billion in Customs related assessments were raised leading to the issuance of letters of demand. We collected outstanding debt totaling R2 billion. We curbed impermissible claims related to the VAT Export Incentive Scheme totaling R92 million. SARS also completed 6550 Customs Seizures totaling R6.6 billion.
  • The detailed work undertaken through the management of risk, comprising revenue leakage prevention, fraud, impermissible refunds and debt equalization is critical. This work alone has contributed R101 billion and completed 1.8 million cases. We remain concerned though. The refund risk remains stubbornly high, and SARS will continue its efforts to manage this.

SARS is making significant inroads in its litigation strategy which resonates with our strategic objective that seeks to provide certainty and clarity for taxpayers ensuring proper interpretation of tax or Customs laws. In the year under review:

  • 110 judgments were handed down in which SARS was successful in 94 cases – resulting in an 84% litigation success rate.
  • SARS conducted 871 criminal investigations dealing with Income tax, VAT and PAYE executed, and 294 were handed to NPA. 85 cases where finalised securing guilty verdict direct imprisonment sentences totaling 49 years to be served, 4 acquittals and a conviction rate of 95%.

More than five years ago, State capture left SARS as an organisation in distress and severely compromised. We embarked on a journey to re-imagine the organisation. SARS is succeeding in its strategic intent of building a tax and Customs system that is based on voluntary compliance and sharpening its capability aimed at detection and deterrence of wilful non-compliance.

Rebuilding of SARS entailed broadening the tax base, instilling and improving a culture of voluntary compliance and fiscal citizenship, seamless intersection of people, data and technology to optimally deliver on our mandate and working with all stakeholders in the tax ecosystem and fostering trust and confidence on SARS. We are seeing positive results to this end.

  • Tax register grew by 411 000 companies, of which 1,500 contributed R214 million in gross revenues in the year under review.
  • 39 900 new employers voluntary registered for PAYE, of which 19 000 contributed R2.7 billion additional tax, totaling R3.4 billion in the year under review.
  • Tax register grew by 57 700 new VAT Vendors of which 14,200 contributed R4.4 billion in gross revenues in the year under review.
  • Tax register grew by 1.1 million individuals.

SARS Commissioner, Mr Edward Kieswetter, said: “The R21.6 trillion tax collections represents a compound growth of 9.9% per year since the inception of SARS in 1997. This has funded the South African democracy and touched the lives of millions who would be destitute without government support and services. We, who have the privilege to  work at SARS are justly proud of these achievements because these efforts contribute directly to nation-building and sustain our democracy.”

He added that the revenue achievements of the past 30 years would not have been possible if it were not for the effective and beneficial partnerships established by working with compliant stakeholders in the tax and Customs ecosystems that deliver maximum benefits for taxpayers, traders, government, and citizens.

Commissioner Kieswetter went on to say: “Ultimately, we are augmenting the work of our employees, with the investment  in  data science, technology, and artificial intelligence, towards  the goal of making the fulfilment of tax obligation a seamless process.”

“I would like to express my sincere gratitude to all South Africans, especially  compliant taxpayers and traders as well as all SARS employees for contributing to this significant revenue outcome,” he concluded.

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