While the country waits with bated breath to hear whether Finance Minister Tito Mboweni decides to increase taxes when he delivers the 2020 Budget Speech today, the general public seems to have lost confidence in the South African Revenue Service (Sars) based on the latest survey by Citizen Surveys.
According to the survey, trust in Sars was at its highest point (62%) in the first quarter of 2018 when President Cyril Ramaphosa took office and committed to bringing the perpetrators of state capture to book.
However, by the third quarter of 2018, it had dropped to 54% arguably because of the commissions of inquiry into state capture and their exposure of the depth of corruption in South Africa.
Strategic research director at Citizen Surveys Reza Omar said when Sars confirmed that it intended to investigate the tax evasion claims arising from the Zondo commission, trust improved.
“However, as no significant action was taken subsequent to last year’s general elections, trust in Sars dropped again, ending the year at 57%,” said Omar.
He said at the February state of the nation address (Sona), Ramaphosa reaffirmed his commitment to tackling the perpetrators of state capture, which would boost public confidence in Sars.
“This is a necessary step in helping to rebuild trust in Sars, and thereby improving the government’s ability to improve tax collection,” he said.
Tax expert Delia Ndlovu, who is the managing director for the Deloitte Africa Tax and Legal business, said the conundrum facing Mboweni was whether or not to increase taxes because South Africa’s economic outlook had deteriorated considerably, negatively impacting on revenue collections.
She said according to the International Monetary Fund, GDP growth in Sub-Saharan Africa was forecast to be 3.5% in 2020/21 but South Africa would only reach a 1% growth by 2021.
“Tax revenue projections were revised down over the medium-term, reflecting weak in-year collections, and the lower tax base outlook. In the MTBPS, the minister acknowledged that Sars expects to collect R1.37 trillion this year. This is R53 billion, or 4%, less than expected,” said Ndlovu.
She said in the MTBPS, Mboweni had indicated that there would be further cooperation between Sars and the Financial Intelligence Centre at the South African Reserve Bank to assist in fighting illegitimate cross-border flows and tax evasion.
“It will be interesting to see what tax reforms the minister implements considering to achieve this objective,” Ndlovu said.
Some of the key challenges that Mboweni will be expected to address include low economic growth; wastage and corruption; mismanagement at local, provincial and national government; revenue shortfalls and underperformance of state-owned enterprises, which were some of the major challenges facing the country.
The data presented by Citizen Surveys showed that just over half (54%) of all South African adults aged 18 years and older watched, listened to, or were aware of the February 2019 Budget Speech and only 36% were aware of mid-term budget speech (MTBS).
“After the MTBS, only 44% of South Africans felt positive about the direction in which the country was heading, which was significantly lower than the effect seen in February (53%). That said, it did not increase the number of South Africans who felt negative; instead, those who said that it had no effect grew by 10%.
“In fact, the proportion of those who said that it had a negative effect dropped by 1%, which helps to explain Mboweni’s favourability rating reaching 33% at the end of 2019 – the second-highest amongst all political leaders measured,” explained Omar.
During the 2018/19 financial year, Sars collected an amount of R1,287.6 billion, against the 2019 budget estimate of R1,302.2 billion resulting in a deficit of R14.6 billion (-1.1%).
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