Finance Minister Nhlanhla Nene says delays in stabilising our finances will merely delay the pain for later. Photo: Brenda Masilela/African News Agency (ANA)

JOHANNESBURG – Finance Minister Nhlanhla Nene yesterday said South Africans had lost trust in the SA Revenue Service (Sars) because of the way they had been treated in the past few years.

Nene told the Annual Tax Indaba in Joburg that the trust deficit led to a decline in tax compliance, with some taxpayers taking it upon themselves to pay as little tax as possible.

He said non-compliance undermined the fairness of the tax system resulting in substantial shortfalls in revenue collections of approximately R30 billion and R49bn in the past two years. 

“Any delays in stabilising our finances will merely delay the pain for later,” said Nene.

The warning came as Judge Robert Nugent continued with his probe into the country's tax administration.

Last month Nugent's commission heard of how Sars frustrated taxpayers by arbitrarily delaying tax refunds, particularly during the months preceding the end of the tax year in what could be read as an attempt to raise tax collection figures.

Nene said the government could not ignore the impact that the growing trust deficit between Sars and taxpayers had on revenue collections.

“A strong and effective tax authority must be geared to limit those activities and make sure that the right amount of tax is collected,” Nene remarked, adding that the rerouting of public resources to a select few had threatened hard-earned gains in tax compliance and morality. 

He said another downside risk was the technical recession the country found itself in and its effect on tax revenue. 

Acting Sars commissioner Mark Kingon said the taxman's debt book had ballooned to R143bn because of an increase in outstanding returns, and late VAT and Pay-As-You-Earn payments from companies.

Kingon said there had been blatant efforts by companies to undervalue imports, particularly in clothing and textile.

He said the problem as well as the illicit economy needed to be tackled by competent enforcement teams. 

“This nonsense has to stop”, he told delegates at the indaba organised by recognised controlling bodies including the SA Institute of Tax Professionals and the SA Institute of Professional Accountants.”

PricewaterhouseCoopers partner Kyle Mandy said last year's revenue shortfall came mainly as a result of the decline in Sars' efficiency to collect taxes. Mandy said only R12bn of the R49bn shortfall could be blamed on economic downturn.

Sars chief officer of enforcement Mogola Makola said the illicit economy would be tackled by a new investigative team that would be operational by the end of the current financial year.