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Finance Minister Tito Mboweni yesterday said that the government would beef up the South African Revenue Services (Sars) in an effort to improve tax collection after years of under- performance contributed the widening of the 2018/19 revenue shortfall.

He said that a new Sars commissioner would be appointed in the coming weeks and that the large business unit, which was a major source of tax collection, would be formally launched in early April.

He said this was part of the government’s commitment to implementing Judge Robert Nugent’s recommendations into Sars, adding that the revenue service was also strengthening its IT team and its IT systems.

“This is crucial for our tax collection efforts,” he said.

The government appointed acting Sars commissioner Mark Kingon a year ago following the suspension of Tom Moyane.

Mboweni said the reforms would include the strengthening of the new Illicit Economy Unit launched in August last year to tackle illicit cigarette trade, which had seen South Africa lose billions in revenue.

“We will not tolerate lawlessness,” Mboweni said ahead of the Budget speech.

“Those who produce cigarettes and sell them to the underground market will be dealt with very severely.”

He said the government lost an estimated R7billion a year in revenue as a result of illicit cigarette producers.

Mboweni said the government was also addressing governance failures through reforms that would include regularising value-added tax (VAT) payments.

Last year, tax ombudsman retired Judge Bernard Ngoepe said that some tax returns “could and should have been paid earlier”.

The efforts to fix Sars come as the projected revenue shortfall for 2018/19 ballooned to R42.8bn from a previous estimate of R27.4bn as administrative weaknesses and the tough economy weighed heavily on collection.

The 2018 Medium Term Budget Policy Statement (MTBPS) announced that Sars would pay overdue tax refunds which rose from the R30.4bn at the beginning of the fiscal year to R41.8bn in September 2018.

The Sars credit book has declined to R31bn from R41.8bn at the end of January 2018. The MTBPS said that the credit book should be about R19bn if verified tax returns were paid urgently.

The 2019 Budget Review said the amount had now been revised to R22bn as a result of rising VAT refund claims, a higher-than-anticipated level of taxpayers who were not submitting the required documents and suspected fraud.

Mboweni said Sars was also implementing recommendations relating to inappropriate action, fruitless and wasteful expenditure, unfair labour practices and maladministration.

He said the revenue service would review contracts that breached public procurement regulations and was expected to act to recover fund.

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