In his recent Budget speech, Minister of Finance Enoch Godongwana said that improved revenue collection was one of the reasons he was able to provide tax relief in excess of R20 billion to both individuals and companies to support the response to energy challenges and to account for inflation tax adjustment.
This week and a fortnight later, National Treasury and the South African Revenue Service (Sars) published the 15th annual edition of the Tax Statistics, showing just how much that was.
The review provides a breakdown of tax collections and other information for the 2018 - 2022 tax years, as well as the 2017/18 - 2021/22 fiscal years.
Due to the strong economic recovery from the pandemic, tax revenue increased by R314.1 billion to R1 563.8 billion for the year ending 31 March 2022, and Sars said in a media statement that tax revenue was noticeable across all tax types, but especially for corporate income tax due to the escalation in commodity prices, as well as domestic taxes on goods and services, that were most impacted on by the lockdown measures induced by the pandemic.
The total tax collected by Sars last year showed a compound annual growth rate (CAGR) of 6.5% over this period, which was significantly lower than the average CAGR of 8.4% attained in the previous five-period from 2012/13 to 2017/18, but insiders say come this year’s collection, growth rates could reflect levels of closer to 25%.
That is an enormous feat and is probably one of the reasons Godongwana felt comfortable enough to give the revenue authority even bigger shoes to fill. The Minister increased the revenue estimate to R1.69 trillion, an increase of R93.7 billion from the 2022 February Budget statement.
Sars Commissioner Edward Kieswetter said in his keynote address at Personal Finance’s annual Raging Bull Awards last week that the fiscal space left for the Minister to increase the revenue estimate proves the resilience of South Africa’s tax base and the focused performance of Sars in fulfilling its mandate.
“Through its administrative efficiencies, Sars has and continues to deploy a number of targeted and focused compliance efforts aimed at shaping the overall compliance landscape. This is carried out by skilled personnel, technology, artificial intelligence and machine learning,” he said.
It is encouraging that the recently independently conducted Perception Survey reported increased trust and confidence in the work of Sars to 74%. This improvement shows that Sars is working very hard to provide clarity and certainty to taxpayers by making it easy and seamless to transact with the organisation.
Although Sars has already begun to lay a firm foundation for achieving the increased revenue estimate through its modernisation efforts, the additional funding allocated to Sars by the Minister in the recent speech (an amount that remains unknown) will go a long way, upskilling Sars staff and to expedite its modernisation journey, in particular, they say, to greatly enhance its capacity and capability to fight the illicit economy, especially illicit cigarettes, fuel and alcohol.
Kieswetter believed that most taxpayers are honest and will comply when provided with assistance to meet their legal obligations. “Whilst many taxpayers have shown signs of moving towards the Sars strategic intent of voluntary compliance, there is still, unfortunately, more work that needs to be done to address those taxpayers that are still non-compliant, " he said.
Sars has made it increasingly hard and costly for those taxpayers who remain wilfully non-compliant over the last few years.
By the end of January 2023, the revenue authority’s compliance efforts secured R10.4 billion through compliance efforts. New technology had also seen more than 3 million taxpayers being automatically assessed, and an accelerated payment of refunds to 75% of taxpayers within 72 hours. Sars is also working closely with other revenue administrations across the globe through the Automatic Exchange of Information about offshore accounts held by many South Africans. Many High Wealth Individuals, as observed through their declarations and disclosures, often mask their true wealth. Kieswetter said Sars would continue its dedicated focus on this segment.
Personal Income Tax (PIT) at 35.5%, Value-added Tax (VAT) at 25.0% and Corporate Income Tax (CIT) at 20.7%, in aggregate, remain the largest sources of tax revenue and comprise 81.2% of total tax revenue collections.
The tax-to-GDP ratio moderated from 23.8% in 2019/20 to 22.3% in 2020/21, followed by an increase to 24.9% in the year under review.
PERSONAL FINANCE