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Johannesburg - Finance Minister Malusi Gigaba has asked President Jacob Zuma to set up an urgent judicial inquiry into tax administration and governance at the SA Revenue Services (SARS)
Gigaba, speaking after a media briefing about plans for South African Airways on Tuesday, said Zuma had agreed to the inquiry.
The finance minister said that SARS Commissioner Tom Moyane had been informed, and had committed to fully cooperating with the inquiry.
Gigaba said the inquiry will be established "soon", and he would in due course announce timeframes, as well as which judge would preside over the process.
The finance minister denied the establishment of the inquiry was related to any of the explosive claims about SARS made in journalist Jacques Pauw's recent book The President’s Keepers.
Revenue shortfall
In his mini budget on 25 October, Gigaba had detailed a R209bn tax shortfall over the next 3 years, with a R50.8bn revenue gap expected in 2017/2018.
READ: Look into SARS, MPs tell Gigaba amid glaring tax shortfall
Gigaba said on Tuesday that, while weak economic growth - projected to reach just 0.7% in 2017- was the single biggest reason for the tax shortfall, other factors feeding into the growing budget hole included “weakening tax morality and challenges facing tax administration”.
He expressed concern about the impact of the tax shortfall, saying that under-collection of revenue impacted "directly on the future budget deficit, debt to GDP ratios and [the country’s] credit rating”.
The finance minister said that “ongoing negative perceptions” around SARS was also impacting tax morality, and he would get to the bottom of these issues.
“There have been a number of issues raised about the capacity of the revenue service, whether founded on fact or not, important not to be dismissive of them”, he said.
Gigaba's full statement
The Minister of Finance Malusi Gigaba has approached President Jacob Zuma for an urgent establishment of an inquiry into the tax administration and governance of the South African Revenue Service (SARS).
The President has acceded to the request. The Commission will be established soon and its details will be released in due course.
The Minister has informed the SARS Commissioner of this proposed inquiry and the Commissioner has expressed his support for it and willingness to cooperate.
“We expect this inquiry to be constructive and to strengthen the institution further where possible.
It is critical for Government to determine the cause of the tax revenue under-collection in order to enable Government to take urgent remedial steps to ensure that SARS is able to meet its revenue targets as set out in the Medium Term Budget Policy Statement (MTBPS) and Budget,” Minister Gigaba said.
The inquiry will help to assess what factors are responsible for the under-collection of revenue by SARS, and what steps need to be taken to improve performance management systems at SARS to improve its capacity to collect revenue.
The MTBPS recognized that whilst the economic cycle is the most likely and significant factor driving lower revenue-collection, other factors could also be at play, like weakening tax morality and challenges facing tax administration.
Whatever the reason for such shortfall, the risk of under-collection of revenue impacts directly on the size of the future budget deficits, and hence on the sustainability of the projected debt-to-GDP trend, and directly on our credit rating and growth prospects.
*This is a developing story.
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