SARS to identify new opportunities and increase revenue collection.
By Lehlohonolo Lehana.
The South African Revenue Service has published its annual performance plan for 2022/23, outlining its strategies and biggest risks for revenue collection over the next few years.
SARS commissioner Edward Kieswetter has had to contend with an extremely constrained economy due to two years of the Covid-19 pandemic and the government’s nationwide lockdowns, which placed immense pressure on revenue collections.
But he has also had to deal with the revitalisation and rebuilding of the revenue service following years of maladministration.
Kieswetter said that SARS has come a long way, and is still working to rebuild the public’s trust, while also making it easier to be tax compliant. “We are well aware that public and taxpayer/trader confidence in SARS is still not where we want it to be to sustain the highest levels of voluntary compliance,” he said.
"We are working very hard and intelligently to ensure that trust and credibility is restored in the organisation. There are many areas where SARS continues to fall short with respect to improving taxpayer and trader experience, and we are committed to resolving systematic issues that negatively affect taxpayers and traders across all SARS interactions."
Despite Kieswetter's commitments, SARS faces several risks, including government debt, which has made the tax service desperate for new revenue collection sources.
"The substantial increase in government debt due to falling revenue collections and the government relief package aimed at addressing the economic impact of Covid-19 has put SARS under immense pressure to collect more revenue from a tax base that is eroded," the group said.
To combat this, SARS said that one of its key strategies over the next three years is to identify new revenue opportunities and increase revenue collection.
This will be accomplished by:
- Employing Artificial Intelligence (AI) to detect non-compliance among taxpayers;
- Developing strategies to tackle growing online transactions and e-commerce.
SARS said that it doesn’t just want to detect non-compliant taxpayers and punish them, though – it wants to increase voluntary compliance across the board.
It noted that the continued lacklustre performance of the economy impacts negatively on tax revenue collection, with year-on-year revenue collection targets becoming more challenging.
Over the next three years, it wants to implement a 'revenue recovery programme’ that is aimed at raising overall revenue by 5% to 10% from what it calls 'compliance' activities.
- Curbing exemptions, thereby reducing the tax system's complexity while boosting revenue by broadening the tax base.
- Developing a tax and customs system based on voluntary compliance.
- Adopting tax broadening strategies to improve the tax collections from a wider base of taxpayers.
- Increasing audit capacity, which is an effective way to encourage compliance.
- Encouraging clients to come forward on a voluntary basis to regulate their tax affairs and avoid the imposition of understatement penalties and administrative penalties.
Rebuilding trust with taxpayers is key to this, however.
"Research and empirical evidence show that taxpayer attitudes towards compliance and their willingness to comply are influenced by how they perceive taxes to be utilised by the government," SARS said.
"Loss of public confidence due to concerns about corruption in the public sector and poor service delivery has the potential to undermine and make it difficult for SARS to increase voluntary compliance."
To restore trust, SARS says it wants to show taxpayers that it is autonomous and acts without fear or favour in instances of tax-related corruption and transgression. This includes going after high-profile tax evaders.
It also intends on advocating for the "prudent use of collected taxes" by engaging with government, industry and the wider public through the media.
"Taxpayers and traders who negligently, deliberately, aggressively, or criminally stay out of the tax system or do not comply, will be detected immediately when non-compliance occurs.
"They will experience a response appropriate to the nature and degree of their non-compliance, which progressively, may include friendly reminders to more intrusive and investigative engagements that enforce compliance," it said.
"Where necessary, hard enforcement may include court action, asset seizure and criminal prosecution. Non-compliant taxpayers and traders may under certain circumstances be named and shamed. The cost of non-compliance will be high and severe."
Kieswetter stressed, however, that "if you are an honest and law-abiding citizen, our actions and interactions should not inconvenience you unduly."