Most companies awarded personal protective equipment (PPE) tenders by government departments were not tax compliant, SA Revenue Service (Sars commissioner Edward Kieswetter said on Monday.
Tax compliance is one of the basic requirements of the normal government tender system, which was set aside to allow emergency procurement of PPE and other equipment to address the urgent needs generated by Covid-19.
A total of 63% of all the companies awarded PPE tenders were not tax compliant.
Kieswetter also said in his keynote speech at the SA Institute of Tax Professionals’ annual tax indaba that 22 of the companies that won R1.3bn of the R2bn of tenders awarded were linked to politically exposed people.
Most of those who were successful in winning tenders had no previous experience in the PPE business and were involved in businesses such as IT shops, car-washing bays, property letting companies, bakeries, events management companies and so on.
“Many of them received funds and transferred those funds into third-party accounts, So it just smells of impropriety and we will not rest to ... ensure that those companies honour the system by paying taxes. Having obtained work and income from the state the least they can do is to pay their taxes,” Kieswetter said.
WATCH: SARS Commissioner Edward Kieswetter confirms to Tim Modise that SARS has investigated 600 cases of possible corrupt PPE-tenders and handed some over to Hawks for prosecution
Sars would also work with law enforcement agencies to ensure that taxpayers engaged in criminal activity were brought to book.
President Cyril Ramaphosa has instituted a system whereby all PPE contracts have to be submitted to an interministerial committee for investigation to ensure transparency. This followed a public outcry over the rampant corruption associated with the tenders.
Addressing revenue collection, Kieswetter noted that the tax collection to end-August amounted to R416bn, 20% lower than the R519bn for the same period in 2019.
This was the result of the lockdown, during which many businesses ceased operations and consumption declined. The Treasury has projected a 7.2% contraction in the economy this year. Economists canvassed by Bloomberg expect a 49% decline in GDP in the second quarter. Stats SA will release the data on Tuesday.
The main contributors to the decline in revenue to end-August were personal income tax, which was down R5bn; corporate tax down R20bn; dividend tax down R2bn; VAT down R24bn; special excise taxes down R9bn; and import duties down R6bn.
Kieswetter said the final cost of the initially estimated R70bn in tax relief would emerge only later. Most of this relief was in the form of deferrals of amounts owing to Sars in terms of penalties and interest. Whether this debt is ultimately paid would depend on whether the businesses owing the money survived the pandemic.
Kieswetter reported on the increased online offerings by Sars, noting that over the past four months Sars had provided the opportunity for 3.1-million taxpayers to be auto-assessed with more than 1-million of them accepting the auto-assessment. This was made possible by the provision of data by third parties, and the use of algorithms and artificial intelligence to populate taxpayers’ returns.
He said this was a “very, very pleasing outcome” for Sars.
Subscribe: iono.fm | Spotify | Apple Podcast | Pocket Casts | Player.fm
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.