Picture: GALLO IMAGES
Picture: GALLO IMAGES

Tax compliance remains at records lows and is a deep concern for both the South African Revenue Service (SARS) and the Treasury, and this was apparent in the tax authority falling short of its revised 2017-18 revenue target.

SARS collected R1.216-trillion for 2017-18, which was R700m, or 0.06%, short of the revised estimate of R1.217-trillion announced in the 2018 budget.

Finance Minister Nhlanhla Nene said revenue collection was driven by the state of the economy, fiscal policy and administrative efficiency.

He stressed, however, that SARS was close to the target but that tax compliance remained low, at levels last seen during the 2008-09 financial crisis.

SARS acting commissioner Mark Kingon said: "Compliance is of deep concern to us. Some of it is driven by perceptions with regards to SARS and perceptions of the country but some of it is also economical."

The focus for SARS was to restore credibility, said Kingon.

PwC head of tax Kyle Mandy said only 25% of 2018’s under-collection was caused by SA’s economic performance, while other factors, such as perceptions of SARS, contributed to the other 75%. "To get back to where we were in terms of compliance two or three years ago is difficult. A general governance point of view and mismanagement of government revenue has played a very significant role in under-collection," he said.

In March, President Cyril Ramaphosa suspended SARS commissioner Tom Moyane as the head of state had "lost confidence in ... [the commissioner’s] ability to lead SARS".

"If SARS and the government get a few things right, we will start to see an improvement," said Mandy.

Keith Engel, CEO of the South African Institute of Tax Professionals, said tax compliance was not just a SARS story but stretched to the government.

"It’s really an expenditure problem," he said, adding that taxpayers wanted to see morality from the state as well.

Raising tax rates beyond the threshold had placed a burden on compliance, said Econometrix MD Azar Jammine. "Raising taxes without cutting growth in government expenditure is counterproductive."

Nene said there was commitment from the government to reduce the expenditure ceiling but the higher burden on personal income tax was in the context of a weak economy.

SARS revenue collections still represent growth of R72.4bn, or 6.3%, from 2016-17.

"The purchasing managers’ index indicated a recovery in the manufacturing sector, which translated into improved company income tax from this sector," said Nene. However, the index dropped back into contractionary territory in March.

The recent interest rate cut and Moody’s decision on its rating should boost private consumption and investment, said Investec economist Lara Hodes.

menons@businesslive.co.za

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