SARS has a plan to increase tax collection in South Africa

The South African Revenue Service has released its annual performance plan for 2022/23, outlining its strategies and major risks to revenue collection in the coming years.

SARS Commissioner Edward Kieswetter had to contend with an extremely limited economy due to a two-year Covid-19 pandemic and the government’s nationwide lockdowns, which put enormous pressure on collections.

But he also had to deal with the revival and reconstruction of the taxman after a decade of bad administration.

Kieswetter said SARS has come a long way and is still working to rebuild public confidence, while also making it easier to comply with taxes. “We are well aware that public and taxpayer / merchant confidence in SARS is not yet where we want it to be to uphold the highest levels of voluntary compliance,” she said.

“We are working very hard and smart to ensure that trust and credibility are restored in the organization. There are many areas where SARS continues to fall short of improving the experience of taxpayers and operators, and we are committed to addressing the systematic problems that adversely affect taxpayers and economic operators in all interactions of the SARS “.

Despite Kieswetter’s pledges, SARS faces several risks, including public debt, which has rendered the tax service desperate for new sources of revenue collection.

“The substantial increase in public debt due to lower revenue collections and the government aid package aimed at addressing the economic impact of Covid-19 has put SARS under enormous pressure to raise more revenue from a tax base that is been eroded, “the group said.

To combat this, SARS said one of its key strategies over the next three years is to identify new revenue opportunities and increase revenue collection.

This will be accomplished by:

  • Employing Artificial Intelligence (AI) for detect default among taxpayers;
  • Develop strategies to cope with growth online transactions and e-commerce.

SARS said it not only wants to detect non-compliant taxpayers and punish them, but it wants to increase voluntary compliance across the board.

He noted that the economy’s continued lackluster performance negatively impacts tax revenue collection, with year-over-year revenue collection targets becoming more challenging.

Over the next three years, he wants to implement a “revenue recovery program” that aims to increase overall revenue from 5% to 10% from what he calls “compliance” activities.

This includes:

  • To curb exemptions, thus reducing the complexity of the tax system and increasing revenues by broadening the tax base.
  • Develop a tax and customs system based on voluntary compliance.
  • Adopt tax widening strategies to improve tax collection from a broader taxpayer base.
  • Increase audit capacity, which is an effective way to encourage compliance.
  • Encourage clients to come forward on a voluntary basis to regulate their tax affairs and avoid the imposition of euphemism and administrative penalties.

However, rebuilding trust with taxpayers is crucial.

“Research and empirical evidence show that taxpayers’ attitudes towards compliance and their willingness to comply are influenced by how they receive taxes to be used by the government,” SARS said.

“The loss of public trust due to concerns about public sector corruption and poor service provision has the potential to undermine and make it difficult for SARS to increase voluntary compliance.”

To restore trust, SARS says it wants to show taxpayers that it is autonomous and acts without fear or favor in cases of corruption and tax transgression. This includes prosecuting high-profile tax evaders.

It also intends to advocate “prudent use of collected taxes” by engaging with government, industry and the general public through the media.

“Taxpayers and merchants who through negligence, deliberation, aggression or crime remain outside the tax system or fail to comply, will be identified immediately when non-compliance occurs.

“They will experience an appropriate response to the nature and degree of their non-compliance, which progressively, may include friendly reminders to more intrusive and investigative commitments that enforce compliance,” he said.

“Where necessary, forced execution can include prosecution, seizure of assets and criminal prosecution. Non-compliant taxpayers and merchants can under certain circumstances be named and humiliated. The cost of non-compliance will be high and severe “.

Kieswetter stressed, however, that “if you are an honest and law-abiding citizen, our actions and interactions should not unduly disturb you.”

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