- South African Revenue Service Commissioner Edward Kieswetter said the R300 billion under-recovery SARS saw was based on shrinking tax revenue impacted by the state of the economy and the unintended consequences of the lockdown.
- Kieswetter said corruption existed even amongst businesses that supplied government with personal and protective equipment during the Covid-19 pandemic.
- Kieswetter said the alcohol and tobacco ban had the downstream effect of triggering a tax compromise of R12 billion in the past four months.
South African Revenue Service Commissioner Edward Kieswetter warned that the country's tax authority was in the throes of a credibility battle in the middle of an already disastrous Covid-19 pandemic which has undermined the ability to make good on revenue collections.
Weak growth, a lack of compliance and corruption brewed a perfect storm which dented SARS ambitions for the year along with the national lockdown's impact on businesses' ability to operate and ordinary South Africans' ability to earn a living.
Speaking to reporters during a virtual briefing that since 2014, Kieswetter said SARS was "...an unfortunate victim of the state capture project", which had severe consequences, including a decline in revenue performance as well as a decline in public confidence and tax morality.
"The decline in revenue was a tragedy because we were also finding ourselves as South Africa in a decline in economic performance. In the past employees in SARS experienced a decline in trust in their management as more and more whistle blower employees were marginalised."
Last month, it emerged that SARS suffered an under-recovery of R47 billion, which was more in tax revenue than the combined amounts that South Africa had borrowed from the International Monetary Fund and the African Development Bank to respond to the Covid-19 pandemic.
Kieswetter said the overall R300 billion under-recovery SARS saw in was also based on the shrinking tax revenue will be significantly impacted by the state of the economy and the unintended consequences of the lockdown.
Up in smoke
Kieswetter said he fully understood that government needed to contain the spread of the virus, to protect the health system by imposing a ban on the sale of alcohol and cigarettes but said this had undeniable consequences in devastating impact on collection of revenue.
"We are looking at a R10 billion compromise in the first four months. The downstream effect of that is at least another R2 billion leading to a tax compromise of R12 billion.
"The tragedy of that is illegal operators have embedded themselves in the system and they used the restrictions to market themselves. It will take us years to reverse the unintended consequences of the alcohol and cigarette impact," Kieswetter said.
Tobacco companies have called on government to expedite the development of a track and trace system for tobacco products to ensure compliance. Kieswetter said SARS had started a fresh process in developing a system that could be "embedded throughout the value chain" of multiple industries.
Suppliers among the truant
Kieswetter said corruption existed even amongst businesses that supplied government with personal and protective equipment during the Covid-19 pandemic and that even among these, suppliers were found to be non-compliant in their tax affairs.
"I even learned of a contract was awarded verbally for R60 million. The levels of abuse are just gross. Companies that were never in the PPE business got tenders. Companies that were registered as pubs, bakeries and events management companies got tenders and then you wonder why," he said.
Kieswetter said SARS was looking into 63 noncompliant taxpayer companies where evidence of a number of offences was found, including failure to declaring as a PPE procurement supplier.
Kieswetter said Covid-19 merely exposed structural weaknesses in the state of our economy and that the work fell upon SARS to improve its perceived credibility so that it could collect much needed tax revenues to assist the most vulnerable South Africans, still reeling from the blow of Covid-19.
“We will have to do the hard work of rebuilding trust. Sadly, in the environment we find ourselves in, criminals thrive, and we have seen a lot of criminal activity. We are still not at the level that we would like to be when it comes to responding to our mandate, but that is a work in progress,” he said.
He said SARS used the pandemic to implementing changes to its operations such as machine driven insights, artificial intelligence, remote solutions and other technologies which he said will be at the core of assisting SARS with re-imagining its work.