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Tax compliance efforts yield billions for the fiscus

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Improved efforts with regards to taxpayer compliance by the South African Revenue Service (Sars) during the 2021/22 financial year, resulted in revenue collections of more than R215 billion, up from R172 billion in the previous financial year.

‘Specific initiatives’ alone raised almost R21 billion (up from R9.4 billion in the previous year), while programmes aimed at combatting criminal and illicit economic activities raised R8.2 billion (up from R1.9 billion), indicating that life is becoming hard and costly for non-compliant taxpayers and traders.

Sars Commissioner Edward Kieswetter says in his overview of the latest Sars Annual Report that the revenue service achieved a success rate of 98% in the number of cases it took to court for prosecution through the National Prosecuting Authority (NPA).

“Our ability to detect and respond to non-compliance has shown marked improvement, but we must do more to deter and prosecute dishonest taxpayers and traders.”

Tender tax offences

The Sars Liaison Unit referred 99 individuals and entities in 14 cases to the relevant business units dealing with state capture for potential tax offences in respect of tenders awarded by Eskom, the South African Police Service, SAA Express, Digital Vibes and Estina.

The Syndicated Tax and Customs Crime division (previously the Criminal and Illicit Economic Activities Division) is tasked with detecting taxpayers and traders who do not comply.

Read: Sars is showing its teeth

The division finalised 239 investigations in the financial year, raised assessments worth R14 billion, and collected R8.2 billion from criminal activities, while 12 preservation orders have yielded another R5.4 billion. It also completed a total of 143 civil investigations into the illicit economy.

Sars Annual Report, 2021/22, compliance, revenue

Source: Sars Annual Report 2021/22

The Criminal Investigations (CI) division has set up a designated team that will conduct preliminary investigations to assess the viability of pursuing identified cases.

The report refers to other cases where fines to the value of R3.8 million were imposed. Following several court orders another R22 million is to be paid to Sars.

Modernisation

Kieswetter adds that Sars will continue to focus on a number of revenue generating priorities, including expanding the use of data and artificial intelligence to detect risk and instances of non-compliance.

The tax authority has spent R487 million on information technology and another R120 million on IT projects. Cases generated through the Sars automated risk engine increase by 33% year on year. It is now collecting around 138 million third-party data records, compared to only 20 million in 2013.

“Continued focus will be on increasing our capability to improve debt collection, implementing various recommendations on the tax compliance of companies and high wealth individuals, fast-tracking criminal investigations and countering illicit practices, as well as shaping the policy and approach to increase revenue collections and service to the informal economic sector.”

Eventful year

“The 2021/22 financial year was eventful, albeit not always positive. The lingering effect of the Covid-19 pandemic, the unrest in KZN and Gauteng, load shedding, increased unemployment and rising interest rates all contributed to strain South Africa’s economic recovery and growth,” says Kieswetter.

He adds that the “proliferation of tax crime and corruption is an aggravating factor” and the “depletion of institutional integrity and capability” still has many stubborn traces throughout the organisation.

However, Sars has made meaningful progress in rebuilding its integrity, credibility, and performance. Its service charter performance score improved from 55% in 2020/21 to 70% in the 2021/22 financial year.

Read: A look at how Sars is rebuilding itself

Sars collected tax revenue of R1.564 trillion, which is R16.7 billion more than the final estimate of R1.547 trillion. This represents an increase of 25.1% or R314 billion compared with the prior year and 15.3% growth from the pre-Covid financial year (2019/20). Tax refunds amounting to R321 billion were paid to taxpayers.

The biggest contributors to total tax collections remain personal income tax (35.5%), value-added tax (25%) and corporate income tax (20.7%)

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