The taxman has taken aim at dodgy tax advisers, revoking the licences of tax practitioners whose own tax affairs are noncompliant, and warning taxpayers not to take advice from those living on the edge of the law.
The warning from SA Revenue Service (Sars) commissioner Edward Kieswetter came as the tax authority reported it collected R9.5bn more in the latest year than February’s budget estimates, extracting more than expected in corporate taxes and clamping down on refund fraud.
Sars figures, which reflect the final outcome for the tax year that ended at midnight on Sunday, show the tax authority collected a net R1.74-trillion, up 3.2% on the previous year. That’s still R47bn below last February’s budget projections, because of a sharp fall in mining taxes, but better than projected in October or February 2024 budgets.
This suggests the 2023/24 budget deficit could come in narrower than expected, though the latest monthly figures show a degree of overspending by the government that could offset some of the revenue surplus.
Kieswetter said tax advisers should be held to a high standard but Sars had identified 53 tax practitioners who remained noncompliant in their owntaxes, “which explains in part how they advise their clients and why their clients are equally delinquent”, he said.
Sars had already revoked eight licences and in some cases launched criminal investigations. It found 14 partners in a single law firm who had underestimated their own provisional taxes.
Sars would focus on firms promoting “certain schemes” and was closely watching for any illicit international flows. Taxpayers should do due diligence when approaching tax practitioners, Kieswetter said.
Sars was also hugely concerned about the levels of tax abuse and low compliance among tax-exempt nonprofit and non-governmental institutions, some of which were being used as vehicles for money laundering and tax crime, and was monitoring this closely, Kieswetter said.
But voluntary compliance has improved from 61% to 64%, with improved levels of public trust in Sars helping to ensure taxpayers pay what they owe.
The compliance figures reveal that large businesses are much more likely to guard their reputations and ensure they are tax compliant than are smaller businesses. Kieswetter said more than 90% of large businesses were tax compliant, versus only two-thirds of small, medium and microenterprises, which tended to have low filing rates and to underdeclare.
Sars has a special focus on improving compliance in the SMME segment of the market, which includes 3.2-million registered taxpayers that contribute 28% of total tax collections. By contrast, Sars’ large business centre serves 37,000 active large business and multinational taxpayers that contribute 32% of the total tax take.
On a gross basis before refunds, tax collected rose to R2.155-trillion, up 4.2% on the previous year, with tax revenues growing somewhat more slowly than nominal economic growth in what revenue officials called a “challenging” year.
A record R414bn of refunds were paid in the year, up 8.6%, but Sars said it had declined to pay out a further R100bn, which was found to be impermissible and it was pursuing VAT refund fraudsters in particular.
Sars deputy commissioner Johnson Makhubu said the increase in refunds partly reflected timing differences: taxpayers could claim VAT refunds on their input costs before the corresponding sale and Sars was looking at doing multiyear reconciliations of this.
Refunds were also driven up by a disproportionate increase in input costs relative to price increases, Makhubu said. Companies had had to absorb higher input cost inflation and this was evident in lower profitability and in VAT refunds.
Mining taxes
The final collections figures from Sars showed personal income-tax collections held up well, growing by a net 8.2% for the year, but corporate income taxes fell almost 9% as mining taxes plummeted on lower commodity prices and Transnet’s woes.
Makhubu said some new renewable energy players were starting to make profits, bringing R2bn into the fiscus during the year to show a return on the VAT refunds that renewable energy producers tend to claim as they ramp up investment spending in their first few years.
Kieswetter also weighed in on reports that the illicit tobacco market accounted for 60%-70% of cigarette sales, saying he had warned at the time the tobacco and alcohol bans were imposed during the Covid-19 lockdown of the risk that this would give rise to the illicit trade being embedded in consumption patterns.
“That is the big fight we have now,” he said.
Sars has taken action against tobacco companies such as Gold Leaf, and Kieswetter said the corruption and tax fraud was often enabled by public officials as well as by “professional enablers” such as tax advisers and bankers.
The SA Institute of Taxation (Sait) said Sars had recorded the highest revenue collection since the dawn of democracy, with more than R114bn collected in the past four days, the same amount collected for the whole of 1994.
Sars’ strategy was working, with the number of taxpayers growing and compliance improving, Sait’s Keith Engel said. “For those who think they can escape the taxman, it is becoming harder and harder.”
Correction: April 2 2024
Figures were changed in an earlier version of this story.
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