The SA Revenue Service (Sars), whose capacity was torn down during the administration of former commissioner Tom Moyane, missed its revenue target for a fifth consecutive year, highlighting the challenge faced by his successor.
Sars, which collects the taxes that the government uses to fund services from education to defence, said revenue collection fell about R15bn short of the government’s revised target for 2018/2019, announced by finance minister Tito Mboweni in his budget less than two months ago.
The R1.287-trillion estimate released on Monday was R57.4bn or 4.3% less than the initial target.
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The tax agency, which was once regarded as a world-class institution and had the reputation of overshooting targets, releasing resources for tax cuts and capital expenditure, has consistently fallen short in the past five years due to a sluggish economy and governance failures. That contributed to
the government imposing a VAT increase in 2018 for the first time in a quarter of a century as it sought to contain its budget deficit.
"Tax compliance has fallen in recent years and the legacy of Sars is not going away in one go," Treasury’s head of tax, Ismail Momoniat, said in Pretoria on Monday.
Edward Kieswetter, a former Sars deputy commissioner during its heyday when current public enterprises minister Pravin Gordhan ran it, is due to take over from Moyane, who was fired in November, on May 1.
His immediate challenge will be to improve tax compliance and revenues and to restore public trust in the agency. During his predecessor’s time in office, compliance sunk to levels last seen during the 2008-09 financial crisis.
PwC head of tax Kyle Mandy said the combination of a weaker economy, tax compliance and the weakening of Sars’ capacity had been responsible for the drop in revenue.
"It’s a perfect storm and it’s been a combination of all these factors," acting commissioner Mark Kingon told Business Day. Kieswetter would concentrate on accelerating the agency’s goal to get compliance back to levels from five years ago, he said.
Overall, Sars collected a gross total of R1.575-trillion, which was offset by refunds of R287.8bn, part of a process of redress for taxpayers whose refunds were often underestimated and not paid out in time under Moyane, enabling the institution to wrongly claim it was meeting targets.
"Before there seemed to be a lot of artificial playing around to show that it had met the target but now we’re seeing them stick to their target and this should correct," Momoniat said.
Sars has set itself a target of R1.422-trillion for the current fiscal year.
"It is an ambitious target, but when you put things in place like the illicit economy unit and the large business centre, it looks possible," Kingon said.
The large business centre and high net-worth individual unit, credited with improvements in compliance and revenue collection, was dismantled during a restructuring by Moyane and consultancy Bain & Co.
Kieswetter had set it up, the Treasury said when announcing his appointment last week.
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