Economists say they are confident in Sars

Economic expert from School of Economics at the University of Johannesburg Peter Baur believes South African Revenue Service (Sars) is becoming efficient.

This comes after Sars commissioner Edward Kieswetter announced the preliminary revenue collection outcome for the 2023-24 fiscal year at a media briefing on Tuesday.

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Baur said while the tax collection for registered individuals and businesses was more efficient, the large informal economy in South Africa remained a large structural concern.

He said overtaxation can have its own set of challenges on households, businesses and individuals.

“Every economy has its own unique tax thresholds, dependent on quality and quantity of services received from state, including health, education, energy and security,” he said.

R1.741 trillion collected

According to Sars, the net amount collected stood at R1.741 trillion, marking an increase of R54 billion compared to last year’s collection. This reflected a 3.2% growth in revenue.

Sars reported that it paid out refunds of R414 billion to taxpayers, the highest yet quantum in refunds compared to R381 billion in the prior year, representing growth of 8.6%.

Kieswetter was pleased R414 billion returned to the hands of taxpayers and said it was good for the economy.

However, he emphasised his concern “about refund fraud and abuse”. Kieswetter revealed Compliance Programme used data, artificial intelligence (AI) and machine learning algorithms to successfully counter criminality and wilful noncompliance.

Ingrid Woolard, professor of economics at Stellenbosch University, said Sars was pushing hard on compliance, which made it harder for individuals and businesses to evade paying their lawful taxes.

“They need to continue investing in AI and use all possible sources of data to identify those people whose lifestyles don’t square with their tax returns,” she said.

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Sars noted examples of the successes of the Compliance Programme included the investigations of syndicates crimes, which contributed R20.1 billion and executed 147 preliminary investigations made up of preservation orders and collapsing one tobacco and gold illicit financial flow scheme.

Woolard claimed the increase was small “but very welcome”.

She said Sars worked hard to improve compliance to identify tax evasion, especially when it came to VAT refunds.

“The corporate income tax figures are slightly higher than expected, but still worrying, reflecting the stagnant state of the economy,” she said.

“It will be interesting to see if Kieswetter can take on the illegal tobacco smugglers.

“If he can, it will be good news for the fiscus and as a demonstration that SA is able to enforce the law,” Woolard said.

Higher compensation accounts for increase

Sars also compared the 2022-23 fiscal year, total tax revenue increased by R54.2 billion driven by personal income taxes of R49.5 billion on the back of higher than estimated compensation of employees and higher domestic VAT of R39.3 billion.

Economic expert Raymond Parsons from North-West University Business School said the report from Sars created confidence in Sars as a manager of SA’s tax system.

“The below-optimal tax revenues have been a vulnerable link in the recent fiscal risks facing SA, where tax revenues have fallen because of a weak economy,” Parsons said.

But Parson said the challenge was to sustain Sars’ worthy performance in the longer run.

He noted Sars itself warned the present “lacklustre” economic landscape in SA, characterised by high inflation, high interest rates and political problems are harmful to tax revenue collection prospects.