Mark Kingon said it was important Sars continue to ensure its large business unit was functioning optimally. Photo: Nhlanhla Phillips/African News Agency (ANA)

JOHANNESBURG – The South African Revenue Service (Sars) said on Monday that it would beef-up its large business centre and close taps on the illicit economy after it collected R14.6 billion less taxes in the 2018/19 financial year than the target set out in the February budget.

Sars said its preliminary revenue forecast showed that it managed to collect R1.287 trillion against the revised target of R1.302trln in February.

The original target was R1.345trln.

Outgoing commissioner Mark Kingon said it was important Sars continue to ensure its large business unit was functioning optimally.

“This is the area where transfer pricing, transfer mispricing, base erosion and profit shifting is happening. We need to be on top of our game in this space insofar as doing audit work in a professional and speedy way,” Kingon said.

“The illicit economy unit has seen the reorganisation of our audit and investigations capability and focus on serious non-compliance emanating from industries such as tobacco, gold, clothing and textiles imports among others.”

The large business centre was established in 2004 with the aim of encouraging compliance, responsible enforcement and specialised expertise to large businesses.

It was dismantled in 2015 following major restructuring under the reign of fired commissioner Tom Moyane.

Moyane also disbanded the illicit economy unit.

However, Kingon re-established the divisions, leading to the seizure of Adriano Mazzotti’s assets in February as Sars began its efforts to reclaim nearly R34 million it said he owed.

The raid was followed by the attachment of assets at five properties belonging to controversial Taiwanese businessman and ANC benefactor Jen-Chih Huang and his wife over a multi-million rand long-outstanding debt to the fiscus. 

Tertius Troost, tax manager at Mazars, said that additional emphasis should be put on the functioning of the illicit economy unit, and this function should keep a close eye on what is happening at the various inquiries.  

“It is alarming that the last target was missed, given that it was already revised sharply downwards from last year. It seems to indicate that the Treasury is over-estimating its revenue collection targets, since not much has changed regarding the economy between now and February 2019,” Troost said. 

“However, Mark Kingon did highlight that load-shedding could be part of the problem for companies earning and declaring lower profits. In addition, he stated that many refunds were paid to corporates in the large business segments which related to old audits of multiple years.”

Last week, President Cyril Ramaphosa appointed former Sars deputy commissioner Edward Kieswetter to head Sars from next month as part of the ongoing restructuring of the agency.

Maarten Ackerman, chief economist at Citadel, said while the R14.6 billion shortfall was slightly less than what was expected; it reflected the trend seen since 2015 where Sars missed its targets.