26 October 2022– The South African Revenue Service (SARS) welcomes the consistent emphasis by the Minister of Finance, Mr Enoch Godongwana, on ensuring that government finances are spent in an equitable, efficient and flexible manner to support South Africa’s development objectives.
The Minister’s policy message focused on strengthening South Africa’s fiscal integrity over the medium term through managing the county’s finances with prudence. The work of SARS is central in that efficient tax revenue collections contribute to the fiscal space required to attend to important social and investment spending priorities whilst keeping an eye on debt service costs.
Delivering the Medium-Term Budget Policy statement (MTBPS) in Parliament today, the Minister of Finance increased the revenue collection estimate that SARS must collect to R1682bn from R1 598bn. SARS provides about 90 percent of all government revenue, which makes this increase in the revenue to be collected by SARS very significant.
“As SARS, we accept the challenge of the revised higher revenue estimate. While the revised revenue estimate is steep, we are committed to act according to what is permissible in law to meet this challenge.” SARS Commissioner Edward Kieswetter said.
He added that “the rebuilding of SARS is evident in improved revenue collection. We are laying a firm foundation for this new environment, which is the synthesis of data driven insights, enabling information and technology infrastructure and employing skilled staff, which are all indispensable for the success of this modernisation journey. We are equally committed to counter criminal and illicit activity. SARS has largely implemented the Nugent Commission recommendations, while outstanding recommendations are currently being aligned with those of the Zondo Commission on state capture.”
This year SARS is celebrating its silver jubilee having been formally established on 01 October 1997 in terms of the South African Revenue Service Act. The legislation gave the organisation a clear mandate to collect all revenues due, ensure optimal compliance by taxpayers and facilitate trade, as well as protect the economy, our society and our borders. Since its inception 25 years, SARS has collected over R18 trillion for the country’s social and economic development
Gross tax revenues are expected to exceed the estimates presented at the time of the 2022 Budget by R83.5bn in 2022/23, of which corporate income tax is expected to account for R62.8 bn. Stronger personal income tax collections are expected to bring in an additional R8.2 bn relative to the 2022 Budget Review projections.
Following a solid start to the year when South African real GDP growth outpaced the most optimistic expectations, buoyed by mining and manufacturing activities in Q1-2022, the economy suffered setbacks in the second quarter of 2022 because of the economic and domestic and global factors, such as the Russia-Ukraine conflict, floods in KZN and other regions as well as labour disputes.
South Africa’s GDP is expected to grow by 1.9% in 2022 from 4.9% in 2021. Revenue collections as at 30 September 2022, amounted to R784.8bn, yielding growth of R64.7bn (9.0%) against prior year collections of R751.0bn. All collections against the previous year showed an upward trend except for the Fuel Levy which recorded a contraction of R9.1bn (-20.9%). The year-to-date growth was partially offset by the total refunds paid out which were R32.5bn (20.9%) higher than the previous year, with VAT refunds R26.2bn (21.0%) higher in the first half of the year.
At budget in February 2022, tax revenues were expected to grow by 3.3% (R1547bn to R1598bn). SARS is continuing to improve the efficiency in tax revenue administration through targeted strategic compliance and enforcement interventions to achieve higher taxpayer compliance ratios.
Mr Kieswetter added that, “While the performance of the economy is important for revenue collection, SARS’ initiatives have counterbalanced the negative impact of the local and global economy.
“SARS compliance efforts have contributed 12% to the net revenues collected. This is in line with our revenue management philosophy that has seen our efforts result in an additional R92.5bn that has been added to the total revenue of R784bn collected to date. Included in the compliance efforts are areas that relate to debt cash collections, curbing impermissible and fraudulent refunds claims, voluntary disclosure management, countering syndicated tax and customs crimes as well as valuation fraud and Customs seizures.”
To illustrate the point, the Commissioner said that SARS’ administrative efforts undertaken in the current financial year to drive compliance revenue, include:
- 831,797 debt cases and 186,691 final demands being issued and successfully pursued, resulting in R 35.2bn being collected.
- SARS prevented R28bn of impermissible and fraudulent refund claims from being processed.
- The setting up specialised teams that assessed the accuracy of provisional tax payments, resulting in R8.4billion being collected.
- Over 2,675 Customs interventions resulting in R1.2 bn being collected.
- SARS’ work in the areas of syndicated tax and Customs crimes is gaining traction, resulting in R1.9bn being collected.
- One (1) preservation order was obtained for the value of R150 million.
- The estimated value of assets under preservation orders is about R2.9 billion.
- The liquidation and sequestration of assets to the value of about R2.3 bn has been carried out.
- SARS also conducted 478 Illicit trade interventions, resulting in 403 detentions and 252 seizures.
Mr Kieswetter said, “SARS will continue to improve its service to taxpayers and traders by providing clarity and certainty to enable them to meet their legal obligations, and by making it hard and costly for taxpayers and traders who wilfully remain non-complaint. The drive to increase the use of technology, especially the use of big data, machine learning and algorithms and the use of third party data will also continue to be expanded.” SARS is on course to further improve its revenue performance in alignment with its Vision 2020-2025 and Strategic Intent of Voluntary Compliance.
Customs valuation fraud, excise under-declaration, syndicated tax crimes, including illicit activities and interventions linked to cases relating to state capture, will remain major areas of focus.
SARS encourages taxpayers to use the voluntary disclosure programme to regularise their tax affairs. However, taxpayers must voluntarily disclose any irregularities to SARS, as the programme will not be available once SARS discovers on its own such non-compliance. In this regard, SARS will be communicating more details on how to access this programme. SARS is on course to further improve its revenue performance in alignment with its Vision 2020-2025 and Strategic Intent of Voluntary Compliance.
Mr Kieswetter said, “In view of the above opportunities, and the increased trust that taxpayers and traders have in SARS, we believe that our work and increased focus on our mandate objectives will ensure the attainment of the revenue projections as communicated by the Minister.”
For further information, please contact [email protected]
# 25 year of serving a Higher Purpose, Your Tax Matters!
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