Another upturn in tax revenue collection by SARS
The South African Revenue Service (SARS) has announced its preliminary revenue collection results for the year 2022/23 financial year which continues a significant growth trajectory over the past few years. It has collected more than R1.6-trillion in net revenue after Sars refunded more than R380 billion to taxpayers, despite economic headwinds, including the dire impact of loadshedding. This is R123-billion more than the previous financial year. According to SARS Commissioner Edward Kieswetter, public confidence in SARS is improving and the services operational efficiency has also improved tax morality and diligence by South Africans.
SARS is responsible for collecting taxes and other forms of revenue on behalf of the government of South Africa. This includes income tax, value-added tax (VAT), customs and excise duties, and other taxes and levies. The methods used by SARS to collect revenue includes, tax returns, audits, and investigations. Taxpayers are required to submit accurate tax returns and pay their taxes on time to avoid penalties and interest charges. SARS also works to prevent tax evasion and fraud through compliance activities, such as conducting audits and investigations. It is important for taxpayers to comply with tax laws and regulations and to keep accurate records of their financial transactions. This helps to ensure that revenue is collected fairly and efficiently, which is essential for the functioning of the government and the provision of public services.
Revenue growth was recorded in all forms of tax when compared to the 2022 revenue outcome. The numbers are as follows:
- Personal income tax went up by 8.3% to R601.7bn
- Company income tax grew by 7.6% to R348.0bn
- Value-added tax (VAT) rose by 8.0% to R422.2bn
- Customs and other taxes went up by 27.4% to R73.9bn.
Another upturn in tax revenue collection by SARS
Another upturn in tax revenue collection by SARS
Another upturn in tax revenue collection by SARS
Another upturn in tax revenue collection by SARS
SARS collected a lesser amount in terms of Value Added Tax. The commissioner explained that a lot of the amounts have to do with load-shedding and increased imports on improvements and repairs needed for certain companies. Generally, it could also show that there is some pressure on consumers when it comes to purchasing normal goods for themselves which then results in companies and the revenue authority getting less money from VAT.
With regards to the performance of provinces, Gauteng accounted for 58% of the revenue service's all-time high net collection of R1.69 trillion for the 2022/23 financial year, followed by KwaZulu-Natal with 18%, and the Western Cape with more than 15%. The Northern Cape recorded a revenue collection of 0.5% - the lowest among the nine provinces.
When looking at the contribution by the different sectors, the finance, insurance, real estate, and business service sectors contributed the most. The finance sector increased by R50 billion, 9.6% year-on-year to R572 billion. Furthermore, 34% of our revenue comes from the finance sector. While all the tax types showed some improvement, the SARS Commissioner stipulated that personal income tax showed the most.
A total of R528.3bn was collected from the large business unit and the newly established high-wealth individual unit, collectively.
With regards sectors, the mining sector moved from a positive contribution in the 2021/22 financial year to a 12% drop in the financial year under review, putting its contribution to revenue to R73.45bn. The sector suffered immensely from loadshedding. The biggest sector - the financial sector - increased by R50bn year-on-year to R572.43bn, representing a contribution of 33% to the overall tax pie.
Though loadshedding has and is affecting the economy, crime remains an issue in our country. Levels of tax and economic crimes remained unacceptably high with tax compliance being a major for the tax agency. The SARS Commissioner stipulated that the compliance actions administered by SARS focus on ensuring that they manage the risk to the National Revenue Fund and ensure that the country’s fiscal integrity is underpinned. The interventions created by SARS to combat tax crimes, include focused debt collection, a focus on criminal and illicit activities and declaration compliance from large businesses, inter alia.
Furthermore, South Africa had become attractive for criminal syndicates who use illicit and secondhand gold, illicit tobacco and fuel to commit crimes. These actions are not captured through the formal banking system or if they are, they are often masked. What is of particular importance is the flow of funds from and between these industries and entities. Based on the investigation results conducted by SARS, there is reason to believe that these illicit financial flows involve tax evasion and money laundering activities to further fund criminal activities. Money laundering in this regard, concerns cash that is generated from various means, including the sale of secondhand gold, fuel and tobacco sales.
Various bank accounts in foreign and local bank accounts are opened with the assistance of corrupt bank officials and by procuring the assistance of individuals who are used as fronts, including those in government and organizations, such as SARS, who can be co-opted and incentivized to be a part of this. In combatting crime, SARS has completed 8000 illicit trade interventions that resulted in seizures of R2.5bn, raised assessments to the value of R57.8bn, collected R16.8bn and preserved over R13bn of assets, handed over 110 cases to the NPA, and secured one conviction so far. Regarding state capture-related matters, 29 audit cases have been completed with an assessment value of R504.1 million. These interventions serve as proof that indeed SARS is at its top performance.
The big question is, seeing that South Africans are under a lot of financial pressure due to the consistent occurrence of inflation, could this affect the current financial year? Financial pressure experienced by consumers can potentially have an impact on SARS. When consumers are under financial pressure, they may be less likely to have the funds to pay their taxes on time or in full, which can lead to a decrease in tax revenue for the government. This can in turn affect the government's ability to provide essential services and fund important projects. In addition, financial pressure on consumers can lead to an increase in tax evasion, which is when individuals and businesses intentionally underreport their income or overstate their deductions in order to pay less in taxes. This can lead to a loss of tax revenue for SARS and can also undermine the fairness and integrity of the tax system. Therefore, it is important for SARS to be aware of the financial pressures that consumers are facing and to take steps to help taxpayers who are struggling to meet their tax obligations. This can include providing guidance and support to taxpayers who are experiencing financial difficulties, implementing targeted tax relief measures, and taking strong enforcement action against those who engage in tax evasion.
Overall, the increased collection of tax revenue by SARS is a positive development that can lead to several benefits for South Africa's economy and society. The increased collection of tax revenue by the South African Revenue Service (SARS) means the following for South Africa:
- Improved service delivery: With increased tax revenue, SARS can invest in improving their services and making the tax collection process more efficient. This can lead to a better experience for taxpayers and improved compliance rates.
- Increased government revenue: Increased tax revenue means more money for the government to invest in critical areas such as healthcare, education, and infrastructure. This can lead to better social and economic outcomes for the country.
- Reduced budget deficit: Increased tax revenue can also help reduce the government's budget deficit. This means that the government can reduce its borrowing and debt levels, which can lead to improved economic stability.
- Enhanced credibility: A well-functioning tax system can enhance the credibility of a country's economy and government. This can lead to increased foreign investment and improved economic growth.
South African taxpayers’ perceptions influence their attitudes towards tax compliance. It is important that SARS should concentrate on changing taxpayers’ perceptions with regard to taxation in order to achieve a more positive attitude towards tax compliance. It is important for government to build a close relationship between themselves and taxpayers. This can be achieved by alleviating poverty and corruption in order to earn and preserve the trust of taxpayers.
