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Slow VAT collections set to improve

Jun 10 2018 11:40
Justin Brown

Acting SA Revenue Service (Sars) commissioner Mark Kingon said this week that the level of VAT collections is set to improve as the 2018/19 tax year proceeds because the hike in the rate of VAT has not yet reflected.

In April, Sars collected R21.4 billion in VAT, up 6.2% from April last year.

However, the rate of increase lags behind the forecast VAT collections for the full year, set at R348.1 billion – an increase of almost 17% on the R298 billion raised in the 2017/18 tax year.

The budget speech in February announced R36 billion in extra taxes for the 2018/19 tax year, including a 1% increase in the VAT rate from 14% to 15%, which is expected to contribute R23 billion to the extra taxes.

“We have different cyclical vendors. Some are on a monthly basis, there is bimonthly,
six monthly and there is even an annual filing. The vast majority are on the bimonthly cycle,” Kingon said.

“The first payment we would have received in terms of the monthly and bimonthly filing would have been the end of last month, not the end of April. Even though the estimate for the year includes the 1% adjustment, it will only be seen in May and June. That is a very important thing; the April figures don’t reflect the impact of the 1%.”

Given this effect, Kingon said the improvement in VAT collections for the rest of the 2018/19 tax year would be better than what the April tax collection figures showed.

Kingon said that capacity at Sars continued to be an issue that was one of his constraints.

“We are addressing that with National Treasury. We believe that we can enhance delivery if we have the right capacity at the right place. We do need more staff. We have 12 600 to 13 200 of staff, depending on whether you count temporary staff or not. At one point, we were in excess of 14 000.”

Kingon said that having closer to 14 000 staff and the right skills could make a big difference at the agency.

Regarding meeting the 2018/19 tax target of R1.345 trillion, Kingon said he was “doing his damnedest” to meet the goal.

READ:  Yunus Carrim calls on Treasury to 'come to the party' on VAT

Gross tax collections for April were R79.5 billion – up 6.7% from the R74.5 billion collected in April last year, but slower than the 10.6% increase required to achieve the target.

“There is a bit of a debate about the state of the economy ... Obviously, that has a direct knock-on effect on our environment.

“Our result is dependent on a few factors. It is tax policy on the one side, and it’s the economy and our enforcement [on the other]. In the enforcement space, I see two legs – our service offering that people like and make it easier for them; and then the stick part, where we whip people and enforce. It is a combination of all factors,” he said.

“We need to sharpen up our processes, whether it be risk identification of transfer pricing cases, blatant fraud that happens in personal income tax or in VAT, where we get fictitious invoices. We need to get far sharper in identifying the risks in these processes.”

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sars  |  mark kingon  |  vat
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