The margin between the tax revenue target and the actual collections seems to be narrowing each year as tough economic conditions persist.
Yet the South African Revenue Service (SARS) seems able to continue pulling the rabbit out of the hat.
This year, according to SARS Commissioner Tom Moyane, the agency was forced to “think outside the box” and find “new and creative ways” of collecting the revenue due to fiscus.
The R1.068 trillion revenue collection equates to an 8.5% growth in total revenue from the previous financial year. SARS actually collected R200m more than what National Treasury estimated.
One has to wonder what those new and creative ways were. For most, it seems SARS does not take no for an answer when demanding payment.
And the banks played their part to ensure that if SARS asked for payments from a taxpayer’s account, it got it. Many taxpayers are probably having a second financially miserable January in April.
The commissioner thanked the banks for their part in helping SARS make its target.
Banks are not all that happy about this role of “debt collectors” for SARS. Many had to create dedicated departments to deal with the increase in payment demands from the tax agency.
It is particularly hectic between January and March - when SARS is out to get its target. Statistics by the Banking Association of South Africa indicate banks each receive between 4 000 and 8 000 appointments on a monthly basis to collect tax debt on SARS’ behalf.
Marelize Loftie-Eaton, a committee member of the Banking Association's direct tax committee, previously commented that during SARS’ collection drive, the appointments can increase to 1 600 per day at R200 per appointment.
However, the men and women at SARS were also doing their part, tapping away on their mobiles. They made more than a million outbound calls and sendt 1.2 million “reminder and demand” SMSes to taxpayers owing SARS money.
This “hands-on” approach, “debt-equalisation” of refunds against tax debt and the prevention of VAT refund pay-outs due to SARS’ “risk engines” ensured a few extra billions that helped SARS make its target.
How much more of this “hands-on” approach can taxpayers stomach?
Finance Minister Pravin Gordhan did not seem all that enthusiastic about this exercise being repeated forever.
“The growth expectation of 0.9% for 2016 is not nearly enough to generate the kind of revenue that enables us to fund all of government’s programmes. Our focus on fiscal commitment should remain,” he said in a statement on this year’s tax collections.
“We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves,” he warned.
This sentiment, and the one about “broadening the tax base” seems to be a common refrain in budget speeches and revenue collection announcements.
What is the reality?
In March last year more than 18 million individual taxpayers appeared on the tax register, yet only 6.6 million were “active” and were expected to submit a tax return.
It does seem like a broad tax base in terms of the numbers, but not in contributions.
Many of those individuals are getting money from the state, but are not directly contributing to the fiscus.
So where does the answer lie?
South African Institute of Tax Professionals CEO Keith Engel says the only option is to expand the tax base in terms of collections.
“Given the lack of economic growth, this has led SARS to the natural conclusion that the more informal parts of the economy must also pay their fair share”.
The question is how?
SARS has been aware of this problem for years, but like many revenue authorities around the world, it has been unable to shift its focus away from the formal sector.
Engel says the real problem is the differing skill sets and rules required. Your typical accountant needs to be more of a forensic auditor and private investigator - which will not be an easy mind-shift.
Tax rules focusing on book profit and turnover in the informal sector are simply not viable given the lack of annual records.
If the law is to assist, simplified proxies must be employed.
This should be part of “out of the box” thinking. It will be a great relief for the shrinking formal sector.
IOL