Growth too low to meet revenue target, says Mark Kingon

SA is not growing enough for SA Revenue Service (Sars) to meet its targets, according to Mark Kingon, a senior official at the tax agency. 

Sars, which collects the taxes the government uses to fund services from education to defence, set itself an ambitious target of R1.422-trillion for this fiscal year in April. However, despite efforts to clean up Sars after years of mismanagement under former commissioner Tom Moyane, revenue collection has been stemmed by the struggling economy, which will likely see Sars miss its revenue target for a sixth consecutive year.

“Every aspect of the economy has a bearing on our ability to collect and it is a struggle. Growth is lower than expected at the start of the fiscal year and that has a direct bearing on the revenue estimates which were based on certain growth estimates in place,” Kingon, who was the former acting commissioner, said at the Tax Indaba in Sandton on Wednesday.

In the February budget, the Treasury forecast growth of 1.5%. This will likely be substantially revised down in October. Most growth estimates for the year are now below 1% after a steep contraction in the first quarter of the year, while unemployment is at an 11-year high of 29%. According to the National Development Plan (NDP), which is the country’s economic blueprint, growth would need to be about 5% to make a dent in the growing unemployment rate.

“We are not seeing the growth we expected in terms of employment taxes. We are seeing retrenchments, lower salary adjustments happen, lower bonus levels and less share options taking place, which have an impact,” Kingon said.

Revenue collection has fallen short of budget targets over the past five fiscal years because of the sluggish economy and governance failures.

Sars, which was once regarded as a world-class institution and had the reputation of overshooting targets, releasing resources for tax cuts and capital expenditure, collected R1.287-trillion for 2018/2019, which was R14.6bn, or 1.1%, short of the revised estimate of R1.302-trillion announced in the February budget.

However, it still represents growth of R71.2bn, or 5.8%, from the R1.216-trillion collected in 2017/2018. Kingon, a Sars veteran who took over in an acting capacity after President Cyril Ramaphosa suspended Tom Moyane in 2018, preceded current commissioner Edward Kieswetter.

Moyane was fired in November, in line with recommendations from judge Robert Nugent, who headed a commission of inquiry into governance failures at the institution

menons@businesslive.co.za