News / South Africa

Virginia Keppler
3 minute read
4 Apr 2018
6:40 am

Sars’s tax collection misses ambitious target

Virginia Keppler

R72.4 billion more was collected this year than last year, but it was R50 billion short of the original estimate and R700 million less than the revised one.

Minister of Finance, Nhlanhla Nene, is seen during SARS preliminary Revenue Results for 2017/2018 press briefing at the SARS offices in Pretoria, 3 April 2018. Picture: Jacques Nelles

The South African Revenue Service (Sars) has collected more than R1.2 trillion in the 2017-18 financial year, which ended on March 31.

Finance Minister Nhlanhla Nene said at the announcement of the preliminary revenue results in Pretoria yesterday that tax revenue amounted to 0.06% (R700 million) short of the revised estimate announced in the February 2018 budget.

However, collection was up by R72.4 billion, or 6.3%, from 2016- 2017.

The finance minister at the time, Malusi Gigaba‚ announced in February’s budget that tax collection of R1.217 trillion was expected. This was a small increase from the previous estimate of R1.214 trillion, but still much lower than the R1.265 trillion target announced in 2017.

At least one economist attributed the slow pace of revenue collection to weak leadership and lack of skills at Sars.

But economist Dawie Roodt believed that President Cyril Ramaphosa’s leadership, with the assistance of Nene and acting Sars commissioner Mark Kingon, had contributed to a positive sentiment toward the revenue service.

Sars collected a gross amount of R1.45 trillion, with refunds of R234.3 billion resulting in the total net collection amount of R1.216 trillion.

However, Roodt pointed out that collection was well below target.

“This was not the target. You use the original budget as the target and based on the original budget collection was nearly R50 billion below target.”

This was due to weak economic growth, among other factors.

“We need to be concerned about tax morality in South Africa,” said Roodt.

“It is faltering and the main reason is the perception that tax money is badly spent. The second reason is because the tax burden has gone up so much.

“People are sick and tired of paying all this money when it’s being wasted by the authorities.

“Weak leadership at Sars and the lack of skills also leads to slow tax collection, but I do think under the new leadership of Cyril Ramaphosa it can improve.”

Roodt said spending in the economy, a traditional engine of growth, was slowing down. The slow recovery of consumer confidence resulted in lower domestic value-added tax (VAT) as more households were reducing debt. As a result, domestic VAT grew at a muted 4.5%, which was well below the 8.1% growth seen in 2016-17.

In his 2018 budget speech in February, Gigaba announced one percentage point increase in VAT, which came into effect on April 1.

His successor said yesterday the VAT hike was expected to raise an additional R22.9 billion in 2018-19.

DA shadow deputy minister of finance Alf Lees said Sars’ failure to meet its revised revenue target by more than R700 million confirmed the dearth of institutional governance at the tax collector. It also pointed to low taxpayer morality during former Sars commissioner Tom Moyane’s disastrous tenure.

Lees said Nene’s announcement that Sars had collected R1.216 trillion against a revised target of R1.217.3 exposes the “crisis of confidence” that has crept into the revenue service and its ability to effectively manage revenue collection.

“Government now has no other option but to close the gap of the R700 million shortfall through increased borrowings, as it is unlikely that there will be additional expenditure savings to counter the revenue shortfall for the year ending March 31, 2018.”

But Lees said Kingon must be commended for trying to pull a rabbit out of the hat to achieve revenue of R1.217.3 trillion that was predicted in the 2017 medium-term budget policy statement.

Additional reporting by ANA

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