The SA Institute of Chartered Accountants (Saica) has warned of the danger of “heavy-handedness” by the SA Revenue Service (Sars) in its treatment of taxpayers as it prepares to ramp up revenue collection.
Sars has been allocated R7.5bn over the next three years — R4bn for debt recovery and R3.5bn for its modernisation programme — and the Treasury expects to collect an additional R20bn-R50bn per year from its debt collection efforts.
The Treasury said in its budget overview that if Sars succeeded in this it would be unnecessary to increase taxes by R20bn next year. Finance minister Enoch Godongwana expressed confidence in his budget vote speech last week that Sars would be able to collect R35bn.
The revenue service will employ 1,700 debt collectors this year, in addition to the 750 employed last year for its unpaid debt collection drive.
However, Saica project director for tax advocacy Lesedi Seforo said in public hearings by parliament’s two finance committees last week that increased pressure on Sars to collect revenue usually led to “heavy-handedness”.
Seforo expressed concern that this could manifest in delayed refunds, action when Sars’ time frames were not met, and quicker applications for garnishee orders. These are obtained on recalcitrant taxpayers’ salaries after obtaining a court order.
Approached for comment, Sars commissioner Edward Kieswetter said it was “unhelpful for Saica or anyone to make sweeping generalisations of this nature”.
“In truth we will always respond to specific incidents of unprofessional behaviour by any of our staff. In the absence of anything specific it actually undermines the hard work we are trying to do.”
Sars spokesperson Siphithi Sibeko said that in the discharge of its mandate “Sars is acting and will always act within the law.
“Sars works with and through all stakeholders to improve the tax ecosystem. Sars will not deviate from working closely and co-operatively with all partners and any fear of heavy handedness is unfounded.”
As is usual annually, representatives of the liquor industry — specifically SAB, Heineken and SA Wine — complained about the budget’s above- inflation increases in excise duties on alcohol and tobacco products.
The poultry industry lobbied for chicken to be exempt from VAT to provide the poor with an affordable source of protein, while the Consumer Goods Council of SA called for the reinstatement of the VAT exemption for edible offal, dairy liquid blends and canned vegetables, as proposed in the first two iterations of the budget at a projected cost to the fiscus of R2bn in 2025/26 and R6.3bn over three years.
The council noted in its submission R2bn represented 0.1% of total gross revenue of R1.986-trillion for 2025/26, and 0.4% of projected gross VAT revenue of R482bn for 2025/26.
The expansion of the zero-rated food basket was meant to compensate the poor for the proposed increase in the VAT rate but was dropped when the VAT increase was withdrawn.
Dairy producer Clover argued for the reinstatement of the zero-rating of dairy liquid blends.
Responding to these submissions, Treasury deputy director-general of tax and financial sector policy Chris Axelson said in a committee meeting on Friday that excise duty rates were adjusted for inflation annually, as a minimum, to preserve the real or effective rates of excise duties. Failure to do so compromised revenue raising and behavioural change objectives.
“Above-inflation increases are necessary to generate additional revenue and discourage consumption of these products that are harmful to human health over time,” he said, noting the Treasury was conducting an overall review of excise duty policy.
On extending the basket of zero-rated goods, Axelson said the Treasury did not believe it was the best course of action. “Zero rating is a blunt tool to assist lower-income households (compared with targeted expenditure), because there is no guarantee that there will be a reduction in prices and it is also a subsidy to all consumers.”
The failure to pass on the price reduction meant the government was benefiting retailers and distributors at a loss to the fiscus.
Axelson said the current zero-rated basket was well targeted for poor households, adding that zero-rating had to be evaluated in terms of its cost to the fiscus against the “potential” benefits to the poor, which received greater assistance from the expenditure side of the budget.
EFF and MK party MPs criticised the public hearings on the budget, which take place every year, as a futile exercise because the Treasury did not consider the proposals.
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