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The article, Mismanagement at Sars led to VAT hike (August 30), is generally correct on the proceedings at the Nugent commission of inquiry on August 29, but the headline does not reflect the article. At no point during the commission’s hearing did any of the four Treasury officials say that the VAT increase in 2018 was due to the "mismanagement" of SARS.
As explained in Treasury’s presentation to the commission and in the 2018 Budget Review, there could be a multitude of reasons behind a (projected) funding gap when preparing for the budget. These could include higher expenditures (for example, due to fee-free higher education) or reduced tax collections from lower-than-expected economic growth, increasing levels of noncompliance or reductions in administrative efficiency.
The funding gap should not be confused with the actual revenue shortfall, which is measured against the revenue estimate set in the budget from the previous year. Any funding gap would need to be filled through either lower expenditure, increased taxes or increased borrowing.
Treasury’s submission to the commission states that "shortfalls in revenue, low growth and the large unbudgeted expenditure increase to accommodate fee-free higher education jointly led to tax increases in the last two years".
In response to judge Robert Nugent’s question on whether the revenue shortfall of about R50bn for 2017-18 led to the rise in the VAT rate, we explained that the shortfall was one of a number of reasons for it, including further expenditure needs such as those for fee-free higher education. This question was related to the revenue shortfall and not to mismanagement at Sars.
However, Treasury’s analysis shows it is unlikely the entire shortfall can be explained by an underperformance in the economy for 2017-18, which may be evidence that inadequate management and the extensive restructuring of Sars contributed to the shortfall, but no direct conclusions on this were presented.
Ismail Momoniat, Deputy director-general, National Treasury
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Wrong on VAT rise
The article, Mismanagement at Sars led to VAT hike (August 30), is generally correct on the proceedings at the Nugent commission of inquiry on August 29, but the headline does not reflect the article. At no point during the commission’s hearing did any of the four Treasury officials say that the VAT increase in 2018 was due to the "mismanagement" of SARS.
As explained in Treasury’s presentation to the commission and in the 2018 Budget Review, there could be a multitude of reasons behind a (projected) funding gap when preparing for the budget. These could include higher expenditures (for example, due to fee-free higher education) or reduced tax collections from lower-than-expected economic growth, increasing levels of noncompliance or reductions in administrative efficiency.
The funding gap should not be confused with the actual revenue shortfall, which is measured against the revenue estimate set in the budget from the previous year. Any funding gap would need to be filled through either lower expenditure, increased taxes or increased borrowing.
Treasury’s submission to the commission states that "shortfalls in revenue, low growth and the large unbudgeted expenditure increase to accommodate fee-free higher education jointly led to tax increases in the last two years".
In response to judge Robert Nugent’s question on whether the revenue shortfall of about R50bn for 2017-18 led to the rise in the VAT rate, we explained that the shortfall was one of a number of reasons for it, including further expenditure needs such as those for fee-free higher education. This question was related to the revenue shortfall and not to mismanagement at Sars.
However, Treasury’s analysis shows it is unlikely the entire shortfall can be explained by an underperformance in the economy for 2017-18, which may be evidence that inadequate management and the extensive restructuring of Sars contributed to the shortfall, but no direct conclusions on this were presented.
Ismail Momoniat, Deputy director-general, National Treasury
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