23 February 2022 – The South African Revenue Service (SARS) welcomes the upwardly revised revenue collection estimate announced by Minister of Finance, Mr Enoch Godongwana. In his 2022 Budget Review speech, Minister increased the revenue estimate to R1 547.07 billion from the February 2021 budget estimate of R1 365.1billion. The 2021/22 revenue yield is expected to result in the tax-to-GDP ratio reaching 24.7%, which is higher than pre-COVID level and that indicates that the extraction rate is on a positive trajectory.
The 2021/22 financial year revenue collections have been trending well above the estimated revenue as set out in the 2021 Budget review and Medium Term Budget Policy Statement. Commodity prices have been thriving in the past few months and therefore, key SARS segments and regions have benefited from higher global demand for commodities. The extra income earned by commodity producing and exporting companies accompanied by SARS’ deliberate and targeted tax compliance work have resulted in a better than expected increase in tax revenue.
SARS continues to make encouraging strides in compliance-related activities. There is a notable year on year increase of 18%. This comprises of focused and deliberate work audits of large business, that has generated an additional revenue in excess of R4 billion. The Illicit Economic Unit has seen finalised investigations and conducted a number of search and seizures that have netted nearly R6 billion. While focusing on facilitating trade, we have also undertaken audit work that has realized above R5 billion. In light of the revised estimate by the Minister, this work will continue and be expanded.
Pursuant to the above, our focus will also continue on a number of revenue generating priorities, which amongst others include the expansion of the use of data and intelligence to prevent leakages resulting from fraudulent VAT and PIT refunds claimed by syndicates operating within the tax ecosystem. Prominence is also on increasing capability to maximise debt collections; implementing the Davis Tax Committee recommendations on the key work streams to impact the corporate and High Wealth Individual compliance landscape; accelerate criminal investigations and counter illicit practices; and shaping the policy and approach on heightening revenue collections and service to the informal economy. The momentum of the above compliance work will continue and accelerate. Coupled with this work, we are committed to enhancing our taxpayer service experience. It is critically important that we continue to provide a seamless service to taxpayers in order to asssist them meet their legal obligations without any difficulty.
As at 31 January 2022, SARS collected R1 252.2billion, yielding a prior year growth of R275.1billion (28.2%) and growth of R169.6billion (15.7%) against 2019/20 collections. The majority of collections against printed estimate show an upward trend with the growth mainly driven by Net corporate income tax (R91.4billion, 55.8%), Net personal income tax (R30.5billion, 7.4%), and Net value added tax (R15.0billion, 5.0%). Collections of excise duties are recovering from the trade restrictions imposed due to the COVID-19 ban on sales, especially on alcohol, with companies now paying duties deferred during the pandemic.
- Furthermore, risks of higher inflation and tighter monetary policy, the evolution of COVID-19 pandemic and delayed implementation of structural reforms also remain. Continued electricity supply constraints, high inflation – with a dire impact on consumer demand and disposable income – pose challenges on revenue collections.
- In the near term, commodity prices are expected to ease due to uncertainties in the global economy. Therefore, the outlook for CIT Provisional tax for 2022/23 is likely to be lower than current levels as the commodity boom subsides.
At the heart of the work of SARS is building and entrenching a culture of Voluntary compliance, which is intrinsic to nation building and ensuring that all taxpayers pay their fair share. This not only strengthens our democracy but lays a firm foundation for a future we all want as a nation.
SARS continues its digitalization journey towards becoming a SMART Modern SARS, with unquestionable integrity, trusted and admired, making it easier for taxpayers to understand their obligations and do business with government. In this respect, we are investing substantial resources to modernise our systems thereby augmenting our capability, through leveraging enabling technologies, data analytics and artificial intelligence as well as the use of machine learning algorithms. We believe that these initiatives will help improve the taxpayer experience, as well as improve our capability to detect and address non-compliance. This will not only help bring about modernisation of Customs but also create necessary efficiencies, which can only result in a better service to taxpayers. Nowhere is this process more urgently required than in dealing with congestion in the Beitbridge border post, which is the largest land border crossing in the continent.
SARS Commissioner Edward Kieswetter said: “We remain cautiously optimistic that we will meet the new revenue estimate. SARS will continue to work dutifully to fulfil its mandate of collecting all revenue that is due in order to build a capable state that serves the well-being of all South Africans. This is the privileged work that aligns to the Higher Purpose that SARS serves.”
It is important note that SARS will be turning 25 years this year. SARS continues to strive towards serving the people of this country effectively and efficiently in pursuit of the higher purpose of assisting the government to create a capable state. Over the years, SARS has made remarkable progress in restoring its integrity, its credibility and its performance. Since its formation, SARS has collected more than R16 trillion for the country’s social and economic development. This revenue has enabled government to improve the lives of millions of South Africans through the provision of healthcare, education, social grants and other basic services. A capable state is not only about the quality of public servants, but it is also about the efficiency of its institutions.
Thank you to all South Africans – as the country continues to navigate out of stormy waters; it is your support and honouring of a social compact with all of you, that ours will be the country that works for all.
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