National Treasury has re-allocated R1.4bn to support reforms at the SA Revenue Service (SARS), which is battling governance challenges threatening revenue collection.
According to the medium-term budget policy statement (MTBPS), reforms currently underway at SARS include "regularising VAT refund payments and rebuilding enforcement capacity".
This process is supported through the budget, which reprioritises R1.4bn to SARS over the medium term.
Evidence heard by the Nugent Commission of Inquiry, which is probing tax administration and governance at SARS, revealed that the agency has been battling to process VAT refunds due to operational changes introduced by a new business model implemented in 2015.
According to the mini budget policy statement, a backlog of VAT refunds at SARS and an underestimation of refunds have led to an "overly optimistic view of revenue growth".
"Net VAT collections account for about R20bn of the in-year revenue shortfall. Two factors account for the revision in net VAT," it said.
"The VAT refund estimate has been revised upwards by R9bn, and about R11bn will be paid out to clear the backlog in the VAT credit book."
Mboweni stated that there was an urgent need to fix SARS, whose capacity, he said, has been ruined.
"It is in this context that the SARS leadership team must be strengthened."
Treasury stated that the SARS inquiry and the Zondo Commission into State Capture have also highlighted "serious governance failures".
Both inquiries began their work this year, in what is regarded as government’s attempt to weed out corruption and maladministration in the public service.
"Government is committed to tackling concerns related to SARS in an open manner. Ensuring transparency in tax administration will help to rebuild taxpayer confidence and compliance," said the statement.
Dozens of past and present SARS employees have presented evidence before the Nugent Commission, in what has given insight into the falling of standards under the leadership of suspended boss Tom Moyane.
The commission’s interim report has recommended that Moyane be immediately removed from his position.
"Public testimony at the Nugent Commission of Inquiry has underlined concerns about severe governance and administrative weaknesses within SARS over the past several years."
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