JOHANNESBURG - Revenue collection in the country worsened during the financial year to the end March, with the SA Revenue Service (Sars) yesterday reporting a shortfall of more than R66billion as company income tax dwindled on weak economic growth.
Sars said its preliminary results showed that it collected R1.356trillion against the estimated R1.422trln made during the 2019 Budget.
But the tax agency said the collection was 5.3percent higher than 2019’s and R68.2bn growth for the 2018/19 financial year.
Last year, Sars collected R1.287trln with a R14.5bn deficit of R14.5bn.
In the past few years, the revenue-collection agency was plagued by mismanagement and allegations of state capture after failing on numerous occasions to meet its revenue targets. Commissioner Edward Kieswetter said Sars was working hard to reverse the dire state of affairs in which he found it when he joined in May 2019.
Kieswetter highlighted the challenging task his administration had to perform and collect every possible revenue against a low-growth economy and shrinking job market.
“We are encouraged to share with the South African public that while the damage was deep and Sars was systematically weakened, the rebuilding programme is substantively under way. It will require hard work and time, but will yield positive results,” Kieswetter said.
“We have had to address the initial issues of leadership, governance and integrity, which were raised in the Nugent Report, and we have significantly stabilised the organisation over the past 12 months.”
The Nugent Commission, chaired by retired Judge Robert Nugent, found that there had been a “significant failure of integrity and governance at Sars” and a deliberate dismantling of governance elements, along with a hollowing out of critical capabilities and a breakdown of vital relationships.
“We have also commenced a process to re-imagine and rebuild Sars. We are basing our administrative work on a strategy of voluntary compliance, and have resolved to build a smart, modern Sars with unquestionable integrity, trusted and admired,” Kieswetter said.
Kieswetter said Sars collected a gross amount of R1.647trln, but the amount was offset by refunds of R291.9bn, resulting in a net collection of R1.356trln.
But measured against the Budget 2020 estimate of R1359bn, the net collection indicated a deficit of R3.1bn, or -0.2 percent.
Kieswetter said the main sources of revenue were personal income tax, with R528.9bn or 39percent and value-added tax (VAT), with R346.6bn or 25.6percent.
Company income tax contributed R214.7bn or 15.8percent and customs duties R55.4bn or 4.1percent.
Kieswetter said company income tax contributions had declined over the few past years, decreasing to 15.8percent in 2019/20 due to low business profits and weak economic growth.
“The relative contribution of the main taxes to total tax revenue has shifted with an ever-increasing dependence on personal income tax revenue, mainly due to tax policy changes,” Kieswetter said.
“Personal income tax remains the largest contributor to total tax revenue and its contribution has increased to 39percent in 2019/20 from 38.4percent the prior year, mainly due to partial fiscal drag relief.
“The contribution of VAT and import duties continues to decrease, mainly due to weak economic growth, with lower consumer and investment spending in the economy,” he said.