[South Africa] SARS increases its compliance focus amid challenging economic conditions

The South African Revenue Service (SARS) has announced that it welcomes the Medium-Term Budget Policy Statement (MTBPS) tabled in Parliament by the Minister of Finance, Enoch Godongwana, on October 30. The Minister revised the 2024 February Budget net tax revenue estimate from R1 863.0 billion to R1 840.8 billion.

SARS said, “As of 30 September 2024, SARS collected gross revenue of R1 070.4 billion yielding a net revenue of R846.2 billion and R224.3 billion in refund payments. The revenue performance was bolstered by stronger collections from CIT Provisional tax and lower-than-expected VAT and PIT refund payments. This was offset by lower-than-expected collections from Customs taxes, PAYE, and the General Fuel Levy.” 

The areas SARS adjusted downward included:

• Lower-than-expected previous-year salary adjustments, reducing the nominal wage bill estimate from Budget 2024 of 8.4% to MTBPS 2024 of 5.5%.
• Slower growth on capital projects across general government, public corporations and the private sector with Gross capital formation anticipated to decline from Budget 2024 of 9.5% to 5.2%.

SARS said, "At Budget 2024 we assumed a 13.8% growth in PAYE based on the 8.4% growth in wage bill. PAYE collections for year-to-date September 2024/25 amount to R340.0bn, lower than the PE by R12.0bn (3.4%) and higher than the previous year by R30.8bn (10.0%).

“Despite having finalised ± 1.3 million more debt cases, which is almost 290% more than the previous year, our debt compliance efforts have yielded lower returns year on year by R9.3 billion, which equals to a 23.6% year-on-year contraction. SARS recorded significant increases year on year on deferred payment arrangements for debt, requests for suspension of payments and issuing final demands. This evidence the degree of hardship felt by taxpayers, which is negatively affecting their ability to honour their tax obligations.

It continued, "The SARS Strategic Intent will continue to focus on Voluntary Compliance, ensuring that taxpayers and traders have clarity and certainty regarding their obligations, along with the necessary tools to facilitate easy and straightforward compliance. Conversely, SARS will impose significant legal and administrative costs on taxpayers and traders who deliberately fail to meet their obligations

“Compliance efforts continue to yield success in dealing with non-compliance in particular segments and tax products. To date, compliance revenue secured R110.1 billion, reflecting a growth of R8.1 billion (8.0%). SARS will continue to intensify its efforts to maintain visibility and reinforce compliance, with plans to invest further on compliance initiatives to close the tax gap by targeting various taxpayer segments.”

Edward Kieswetter - SARS Commissioner - said, “In pursuing the attainment of the 2024/25 tax revenue estimate of R1 840.8 billion, SARS will be unrelenting in its drive to engender voluntary compliance. Critically in this pursuit, is to ensure that intermediaries charged by law to collect taxes on behalf of SARS pay it over. Importantly, SARS is ready to act against those who willfully and defiantly ignore their legal obligations by misrepresenting their true economic status. 

Those who enable this conduct are equally culpable. Taxpayers who abdicate their legal obligations place a disproportionate burden on honest taxpayers. Taxes play a critical role in cushioning the most vulnerable and destitute in our society. In this respect, voluntary compliance is sacrosanct.”

Mr Kieswetter continued, “SARS will continue to intensify and deepen its existing administrative efforts. We will continue to use sophisticated data science and artificial intelligence, to maintain the balance between service to taxpayers/traders, whilst managing risks to the fiscus by detecting dishonest taxpayers.”

“SARS will deploy more data science and artificial intelligence (AI) to step up its focus on the following areas of compliance risk: 

• Broadening the tax base via third-party data sources: Leveraging data from both formal and informal sectors to widen the tax base.

• Work to register all taxpayers and traders, through predictive modelling, who ought to be on the register and ensure that they honestly file their declarations and pay their dues where necessary. 

• Build its detection capability using machine learning models and Artificial Intelligence (AI) to significantly improve service and offer a seamless service to honest taxpayers. This will also be used to detect dishonest taxpayers, improve debt collection while expanding the tax base and deal with tax avoidance.

• Enforcing trade laws against the illicit economy (Customs and Excise): Strengthening tools to detect and prevent illicit activities, including those related to tobacco, fuel, and illicit financial flows.

• Focusing on dispute prevention and resolution: Prioritizing products and strategies that prevent disputes that can be resolved.”

“SARS is the nation’s treasure; a well-functioning tax and customs administration is a cornerstone to our vibrant democracy and should never be taken for granted. SARS seeks to ensure revenue sustainability by securing appropriate investment in SARS, and funding certainty. From a human capital perspective, SARS will continue to attract, develop and sustain a workforce that is future-ready. We will be building the leadership bench strength of SARS and protect the autonomy of the institution,” Mr Kieswetter said.

Despite the challenging operating environment, SARS reportedly expects that the start of a cycle of interest rate cuts will spur consumption expenditure. This expansion is expected to drive economic growth and widen the tax base, leading to buoyant corporate tax, and VAT revenues. 

In addition, the agency says the introduction of the “Two-Pot” system is expected to increase the tax base in the short to medium term. It expressed its appreciation for its 12,821 staff members, stating that they will continue to work diligently in achieving the Minister of Finance’s revised revenue estimate.

Source: South African Revenue Service

(Quotes via original reporting)

The South African Revenue Service (SARS) has announced that it welcomes the Medium-Term Budget Policy Statement (MTBPS) tabled in Parliament by the Minister of Finance, Enoch Godongwana, on October 30. The Minister revised the 2024 February Budget net tax revenue estimate from R1 863.0 billion to R1 840.8 billion.

SARS said, “As of 30 September 2024, SARS collected gross revenue of R1 070.4 billion yielding a net revenue of R846.2 billion and R224.3 billion in refund payments. The revenue performance was bolstered by stronger collections from CIT Provisional tax and lower-than-expected VAT and PIT refund payments. This was offset by lower-than-expected collections from Customs taxes, PAYE, and the General Fuel Levy.” 

The areas SARS adjusted downward included:

• Lower-than-expected previous-year salary adjustments, reducing the nominal wage bill estimate from Budget 2024 of 8.4% to MTBPS 2024 of 5.5%.
• Slower growth on capital projects across general government, public corporations and the private sector with Gross capital formation anticipated to decline from Budget 2024 of 9.5% to 5.2%.

SARS said, "At Budget 2024 we assumed a 13.8% growth in PAYE based on the 8.4% growth in wage bill. PAYE collections for year-to-date September 2024/25 amount to R340.0bn, lower than the PE by R12.0bn (3.4%) and higher than the previous year by R30.8bn (10.0%).

“Despite having finalised ± 1.3 million more debt cases, which is almost 290% more than the previous year, our debt compliance efforts have yielded lower returns year on year by R9.3 billion, which equals to a 23.6% year-on-year contraction. SARS recorded significant increases year on year on deferred payment arrangements for debt, requests for suspension of payments and issuing final demands. This evidence the degree of hardship felt by taxpayers, which is negatively affecting their ability to honour their tax obligations.

It continued, "The SARS Strategic Intent will continue to focus on Voluntary Compliance, ensuring that taxpayers and traders have clarity and certainty regarding their obligations, along with the necessary tools to facilitate easy and straightforward compliance. Conversely, SARS will impose significant legal and administrative costs on taxpayers and traders who deliberately fail to meet their obligations

“Compliance efforts continue to yield success in dealing with non-compliance in particular segments and tax products. To date, compliance revenue secured R110.1 billion, reflecting a growth of R8.1 billion (8.0%). SARS will continue to intensify its efforts to maintain visibility and reinforce compliance, with plans to invest further on compliance initiatives to close the tax gap by targeting various taxpayer segments.”

Edward Kieswetter - SARS Commissioner - said, “In pursuing the attainment of the 2024/25 tax revenue estimate of R1 840.8 billion, SARS will be unrelenting in its drive to engender voluntary compliance. Critically in this pursuit, is to ensure that intermediaries charged by law to collect taxes on behalf of SARS pay it over. Importantly, SARS is ready to act against those who willfully and defiantly ignore their legal obligations by misrepresenting their true economic status. 

Those who enable this conduct are equally culpable. Taxpayers who abdicate their legal obligations place a disproportionate burden on honest taxpayers. Taxes play a critical role in cushioning the most vulnerable and destitute in our society. In this respect, voluntary compliance is sacrosanct.”

Mr Kieswetter continued, “SARS will continue to intensify and deepen its existing administrative efforts. We will continue to use sophisticated data science and artificial intelligence, to maintain the balance between service to taxpayers/traders, whilst managing risks to the fiscus by detecting dishonest taxpayers.”

“SARS will deploy more data science and artificial intelligence (AI) to step up its focus on the following areas of compliance risk: 

• Broadening the tax base via third-party data sources: Leveraging data from both formal and informal sectors to widen the tax base.

• Work to register all taxpayers and traders, through predictive modelling, who ought to be on the register and ensure that they honestly file their declarations and pay their dues where necessary. 

• Build its detection capability using machine learning models and Artificial Intelligence (AI) to significantly improve service and offer a seamless service to honest taxpayers. This will also be used to detect dishonest taxpayers, improve debt collection while expanding the tax base and deal with tax avoidance.

• Enforcing trade laws against the illicit economy (Customs and Excise): Strengthening tools to detect and prevent illicit activities, including those related to tobacco, fuel, and illicit financial flows.

• Focusing on dispute prevention and resolution: Prioritizing products and strategies that prevent disputes that can be resolved.”

“SARS is the nation’s treasure; a well-functioning tax and customs administration is a cornerstone to our vibrant democracy and should never be taken for granted. SARS seeks to ensure revenue sustainability by securing appropriate investment in SARS, and funding certainty. From a human capital perspective, SARS will continue to attract, develop and sustain a workforce that is future-ready. We will be building the leadership bench strength of SARS and protect the autonomy of the institution,” Mr Kieswetter said.

Despite the challenging operating environment, SARS reportedly expects that the start of a cycle of interest rate cuts will spur consumption expenditure. This expansion is expected to drive economic growth and widen the tax base, leading to buoyant corporate tax, and VAT revenues. 

In addition, the agency says the introduction of the “Two-Pot” system is expected to increase the tax base in the short to medium term. It expressed its appreciation for its 12,821 staff members, stating that they will continue to work diligently in achieving the Minister of Finance’s revised revenue estimate.

Source: South African Revenue Service

(Quotes via original reporting)