The government’s allocation to Sars falls short of international standards for developing countries and undermines its ability to attract and keep critical skills and invest in technology, Sars commissioner Edward Kieswetter says.
The commissioner, who briefed parliament’s finance committee on Wednesday on the tax authority’s annual performance plan, has always said that budgetary allocation to Sars is an investment, the return on which is higher tax revenue collected.
While compound annual growth in gross revenue from 2015 to 2022 was 6.92%, Sars’ grant allocation rose only 2,6%.
MPs shared Kieswetter’s concern about Sars’ lack of resources which he said had for years seriously undermined its ability to fulfil its mandate and severely compromised SA’s fiscal integrity.
“We require resources as our ‘must-win battles’ are at risk,” Kieswetter said. These included broadening the tax base and improving voluntary compliance.
He said inadequate resources were not be sustainable in the long run if Sars was expected to grow tax collected well above GDP growth while funding rose at less than the consumer price index.
Kieswetter said that Sars’ funding should have been R16.87bn in 2022/23 in line with the Organisation for Economic Co-operation and Development (OECD) recommendation of 1% for cost of revenue collection for developing countries as against revenue collected. The actual allocation was R11.6bn.
Over the next three years the shortfall would be R21.6bn, with the shortfall being R7.9bn in 2023/24, R7.1bn in 2024/25 and R6.5bn in 2025/26. Sars is projected to receive R12.5bn in 2023/24, R12bn in 2024/25 and R12.5bn in 2025/26.
The effects of lack of resources, Kieswetter said, could be seen in Sars’ ability to replace critical skills; its ability to maintain technology infrastructure; significant underinvestment in modernisation; and the ability to pay salaries that can attract and retain scarce talent.
“Kieswetter said from 2015 to 2022 capital expenditure fell by a compound 5.6%. If we do not make the appropriate investments in technology and data science, we will continue to fall behind.
“We are no longer able to attract the people we need because we can’t compete (in terms of remuneration) with the banks, the financial services sector and the legal firms, which is the area we draw our staff from,” he said. In 2022, 515 staff left Sars, most of them because Sars could not match offers from the private sector.
Kieswetter estimated that Sars would need more than R1.4bn over the next three years to address its skills gap, but it was allocated only R150m for this in its approved 2023/24 budget.
Sars needed to invest in skilled staff in information technology (R166m for 66 staff), data analytics (R66m for 72), audit risk and dispute resolution (R215m for 412), investigations of tax evasion and tax crimes (R225m for 228); graduate development programme (R98m for 319), and rebuilding Sars capacity (R690m for 1,104).
Kieswetter told MPs that the energy crisiswas still a big concern. He estimated the risk of load-shedding to tax revenue at about R60bn. But opportunities for tax revenue lay in the emerging sector of renewable energy. “This is a little bit of bright light in a dark load-shedding world,” he said.
Sars chief revenue officer Johnstone Makhubu said the R60bn revenue loss estimate was for 2022, with part of it likely to be reflected only in provincial corporate income tax payments due in June.
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