Sars is being fixed, says Mboweni, as Treasury again faces shortfall

2019-02-20 14:32 - Jan Cronje, Fin24
(iStock)

The SA Revenue Service (SARS) is being fixed, Finance Minister Tito Mboweni said in his maiden Budget speech in Parliament on Wednesday, as he thanked retired Judge Robert Nugent for chairing a judicial inquiry into the tax agency.

Nugent presided over a judicial commission of inquiry that investigated tax shortfalls and issues of governance at the agency, hearing testimony about working under former head Tom Moyane and how global consultancy Bain was brought in to change parts of its operating model.

Treasury announced in the Budget review that tax revenue estimates for the 2018/19 financial year had again been revised downwards.

It now expects a revenue shortfall of R42.8bn, an increase of R15.4bn over the estimate of R27.4bn in the October Mini Budget.

Th revenue collection shortfall was caused, in part, by problems with tax administration at SARS, in addition to broad economic weakness and higher than expected VAT refunds.

"Problems with tax administration, as highlighted in the findings of the SARS commission, partly explain poor revenue collection performance," Treasury stated in its Budget review.  

"Improving collections hinges on restoring the efficiency of SARS. In the short term, such improvements may be more effective in raising revenue than further substantial tax increases." 

The tax agency has been without a permanent commissioner since Moyane was first suspended and later fired by President Cyril Ramaphosa.

Mboweni said a new commissioner would be appointed in coming weeks, but did not provide further details.

He added that the agency's dedicated illicit economy unit, launched in August 2018, would fight the trade in illicit cigarettes and tobacco. There is an estimated to cost the Treasury of billions of rand in lost revenue in this regard.

Mboweni also announced that Judge Dennis Davis would be assessing the tax gap, or the difference between revenue collected and what ought to be collected.

'Render unto Caesar'

In a pre-Budget briefing to journalists, which was also attended by acting SARS commissioner Mark Kingon, Mboweni referred to the the tax agency's recent moves against controversial businessman Adriano Mazzotti, without mentioning him by name. 

Mboweni said SARS had been "paying a courtesy visit to some people", adding there would be "some more courtesy visits" to come. 

Kingon, meanwhile, said the revenue service had been closely watching the proceedings at the commission of inquiry into state capture, and its illicit unit was also investigating instances of tax not being paid on fuel and clothing.