The tax authority will undertake an accelerated drive this year to collect the R44bn in undisputed debt owed at end-March by taxpayers who have contracts with the government.
“You cannot benefit from the state and not be in good standing in terms of taxes,” newly appointed South African Revenue Service (Sars) commissioner Johnstone Makhubu said in his maiden presentation on Wednesday to parliament’s finance committee on Sars’ strategic and annual performance plans.
Makhubu took over from former commissioner Edward Kieswetter at the beginning of May.
“My attitude is that if the debt has been longstanding and people have been getting frequent payment from the government, they ought at some point to suffer the consequence of their noncompliance,” Makhubu told MPs.
The R44bn forms part of the total R66bn in outstanding tax owed by entities having active contracts with the government.
“We are working closely with provincial treasuries as well as the National Treasury to determine that when the payments to these entities are due [when invoices are presented] and before those payments are made, the tax administration is alerted so that we can effect third-party appointments to get to that money before [it is paid],” Makhubu said.
He acknowledged that this could have the unintended consequence of employees not being paid salaries due to the behaviour of the owners or directors of those companies. Sars is willing to enter into payment arrangements if needed.
Delinquent directors
A new strategy will also be pursued to have directors who were frequently involved with multiple companies that incurred tax debts, declared delinquent under the Companies Act. Makhubu said these directors should not have the privilege of running companies and being company directors in future.
The commissioner was asked by MK party MP Des van Rooyen about the tax affairs of President Cyril Ramaphosa regarding his Phala Phala game farm, and whether the issue does not need to be revisited. But Makhubu said he has reviewed the documents that informed Sars’ decisions regarding concerns over a specific period. He is not at liberty to disclose the private tax affairs of taxpayers beyond those periods.
In March 2023, Sars issued a statement that Ramaphosa was tax compliant and that he had declared the $4m derived in 2020 from the sale of game from the farm. Van Rooyen said MK is unhappy with the way Sars had dealt with the issue, as it is apparent, he said, that tax laws were undermined.
Makhubu said that he will uphold the autonomy and independence of Sars, which will act without fear, favour or prejudice.
He referred to the current economic circumstances, which will make collecting the 2026/27 revenue target of R2.13-trillion challenging. Already R17.2bn in tax revenue derived from the fuel levy has been foregone due to the fuel levy relief afforded by the government to assist with the hike in the oil price caused by the US-Israel war with Iran.
Supply chains have been disrupted. Higher inflation and higher interest rates will result in lower disposable income, lower spending and lower VAT revenue, as well as lower profits for companies.
MPs said they support Sars’ plea for more funding, which Makhubu said is needed, among other things, to close the tax gap (the difference between the amount of tax that should be collected and that which is in fact collected), which is estimated at R350bn-R450bn. The debt book at the end of the financial year was about R650bn, of which about R300bn was flagged as collectable. Of this about R70bn was more than five years old.
Makhubu noted that since 2017/18 there has been a R43.6bn shortfall between the budget requested by Sars and the amount allocated by the government, which represented the extent of its underfunding. It needs to employ an additional 2,380 full-time employees.
The commissioner gave the assurance that Sars will continue on the trajectory laid down by former commissioner Kieswetter to build a solid, stable tax authority. This will include accelerating the modernisation project and getting the basics right. Sars needs R7.5bn-R10bn over the next seven to 10 years for modernisation.
Several leaders in the organisation have pledged to undergo lifestyle audits.
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