Business Maverick

BUSINESS ANALYSIS 168

Rebuilding the SA Revenue Service, pillar by pillar

Rebuilding the SA Revenue Service, pillar by pillar
The rebuilding of SARS is based on three pillars. (Photo: Gallo Images/Misha Jordaan)

SARS Commissioner Edward Kieswetter believes the service can find ‘tens of billions’ in new revenue, if not more. This is over and above the revenue that will come from raising our taxes – the finance minister has pencilled in an additional R5-billion in tax increases in the next financial year and a total of R40-billion over the next four years.

First appeared in Daily Maverick 168

Finding these billions is important if SARS is to help plug the hole in South Africa’s finances.

I wish him luck. We all do. It’s in the national interest to have a healthy receiver of revenue that can support the fiscus. 

But recent news revelations cause me to have some serious reservations about SARS’ ability to win on all fronts. 

The rebuilding of SARS is based on three pillars. 

The first is restoring capacity after the institution was hollowed out during the Tom Moyane years when at least 2 000 long-standing staffers were unceremoniously removed, when units like the large business investigation unit were dismantled and critical IT projects were neglected. By all accounts, the effort to create an agile and digitally enabled organisation is progressing, particularly on the IT front.  

A second pillar requires that SARS tackle illicit activity – from VAT and customs fraud to criminal syndicates – that has escalated dramatically over the past decade.

“Trade mispricing and underdeclaration are rife,” the commissioner told an audience of some 1 000 investment managers at a recent seminar hosted by asset manager Ninety One. “We are working hard with our sister agencies in government, the NPA along with the SIU and the Hawks to ensure we bring those criminals to book,” he said.

There has also been a rise in behaviour that walks a fine line between the legal and illegal – such as aggressive tax structuring. South Africa’s corporate tax rate of 28% is high by global standards, and paying so much tax is almost always a grudge expense considering our government’s track record of mismanagement and corruption. These structures exploit loopholes in local legislation and remove the businesses from the South African tax base without breaching the exchange control rules. 

The abuse, notes Kieswetter, is wide and far-ranging.

This is where artificial intelligence and other data tools are essential and SARS is advancing the use of this technology. In the past financial year, it avoided about R500-million of illicit VAT refunds and “found” an additional R500-million in taxes on revenue earned from undeclared second and third properties. 

The other area of focus is to improve levels of compliance in the country. “We know that the levels of compliance have been on a steady decline – and we are working hard to arrest that.”

In this regard, SARS’ efforts to make it easier for taxpayers to submit their returns deserves recognition. As does the fact that SARS pays its VAT refunds and tax refunds within days, as it used to do back in the day.

And then last week we learned that SA’s top diplomat in Los Angeles has rejected more than 30 properties offered to her by the department of international relations and has insisted her home, preferably on Rodeo Drive in Beverly Hills, is fitted out with new cupboards and furniture from the East. 

But when it comes to improving tax morality, which is the willingness of individuals to pay their dues and comply with the tax rules  – well I wish the commissioner the best of luck. 

Tax morality has been declining for years as citizens wearied of government corruption and wastefulness. Cyril Ramaphosa’s government has been talking about stamping out corruption and getting value for every rand invested in the economy, but talk is cheap and citizens are watching closely. 

Yes, the Zondo commission is doing a fantastic job exposing the depth of the rot, while the NPA, Hawks and SARS are working closely together to ensure the guilty are brought to book.  

But it seems every time I read the news some new scandal involving our civil service emerges – whether it’s the police force, parts of which are deeply entwined in the criminal underworld, or provincial MPs at the trough, or diplomats behaving badly. They all sicken me, but these two stories must take the cake: In October we learned that the husband of South Africa’s acting ambassador in Sudan allegedly hired hitmen to kill the embassy’s intelligence officer. Apparently, he was preparing a negative report on her. These days it’s easier to kill someone than face the criticism. 

And then last week we learned that SA’s top diplomat in Los Angeles has rejected more than 30 properties offered to her by the department of international relations and has insisted her home, preferably on Rodeo Drive in Beverly Hills, is fitted out with new cupboards and furniture from the East. 

If these are your priorities then I’m guessing that advancing South African business interests in foreign lands is not that important.

I cannot for one moment believe that these two individuals were the best candidates for the job.

What is sometimes forgotten is that while public service professionals are funded from the fiscus (and debt), it is the ordinary South African, the one who pays tax, and VAT, and road taxes, and sin taxes on every bottle of beer or packet of smokes who funds the fiscus. As such, we deserve to be treated with respect. Dammit. The appointment of such individuals as representatives of our country is, frankly, insulting.

And so now, commissioner, let’s talk about tax morality. For the record, my tax affairs are in order. But trust takes time to be rebuilt, and the government needs to do more than talk the talk. BM/DM

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