Sars needs certainty of funding — Kieswetter

Sars commissioner Edward Kieswetter has stressed the importance of funding certainty for the tax authority notwithstanding the fiscal austerity imposed by the National Treasury as a result of weak economic growth and lower revenue collection. 

Kieswetter also reiterated the problem of underfunding of the tax authority, which he estimated at more than R20bn over the medium-term expenditure framework. In any one of the years Sars has a shortfall of between R6bn and R8bn.

The commissioner has previously pointed out that the funding of Sars should be regarded as an investment that generates returns in terms of better revenue collection. 

Briefing parliament’s finance committee on Sars’ 2022-23 annual report on Wednesday, Kieswetter said that the lack of funding certainty had been discussed with finance minister Enoch Godongwana and National Treasury director-general Duncan Pieterse. 

“The more critical issue for us is that we don’t have funding certainty. What funding certainty provides us is long-term planning. Many of our modernisation capital projects are multiyear projects. We enter into multiyear contracts without necessarily having certainty of funding," he said. 

“I have addressed this issue with the minister and with the director-general of Treasury that Sars must be given the assurance of funding over a three- to five-year period. This allows us to build a more visible line of sight of our organisation’s programmes and significant capital investment. Instead, there is this constant issue that our funding may be reduced.” 

Sars’ grant from the government in 2022-23 was R11.6bn and it was allocated R12.2bn for 2023-24. 

Kieswetter said he understood that the country was undergoing austerity measures, but highlighted the need for an institution such as Sars to invest in its human capability as well as in data science and technology.

Sars spent R646m on information and communications technology in the last financial year. 

Kieswetter also called a readjustment of Sars’ funding base. The tax authority’s baseline budget had never been restored after R1bn was removed from its funding in 2014-15. “This has never been corrected,” he said. “Whatever the escalation is, it has been on a base that was deliberately reduced in 2014-15.”

Kieswetter highlighted the positive returns of Sars’ compliance work. Whereas the compound annual growth rate in Sars revenue collection over the five years since 2018-19 was 7% to R2.068-trillion in 2022-23, the growth in revenue from compliance activities was 21.76%, from R128.4bn in 2019-20 to R231.8bn in 2022-23.

Revenue from compliance work contributed 13.7% to overall revenue in 2022-23. 

“This means the compliance effort of Sars is filling the gap of what is lost when economic assumptions are adversely adjusted. We believe that were it not for the compliance effort and the resultant revenue, our revenue shortfall would be significantly worse,” Kieswetter said.

He noted that low levels of compliance persisted across the entire tax base and targeted efforts at enforced compliance were necessary. 

Sars finalised 248 criminal investigations during the year, which were handed to the National Prosecuting Authority. 

Kieswetter noted that a survey conducted during the past year found that public attitudes towards compliance was 76.5% while public trust in Sars was 66%. 

Sars received a clean audit from the auditor-general on its 2022-23 financial statements. 

ensorl@businesslive.co.za