Despite red flags about South Africa's diminishing tax base, SARS is not slowing down

The South African Revenue Service (SARS) has been highly effective in its tax enforcement methods throughout South Africa, and the National Treasury is planning to grant it extra money to finance its anti-noncompliance campaign.

Finance Minister Enoch Godongwana complimented SARS’s accomplishments over the previous three years during his national budget statement on Wednesday (23 February).

Godongwana increased tax revenue collection for 2022/23 to R1.68 trillion. This is R93.7 billion more than last year’s budget forecasts and R10.3 billion more than the 2022 medium-term budget policy statement estimate.

He said: “The improvement in revenue is due to the higher collection in corporate and personal income taxes and in customs duties. This partially offset the lower value-added tax estimates.”

“Our country is reaping the benefits of a more efficient and effective tax administration, that is, building trust to increase voluntary compliance and boost revenue collections,” the minister said.

SARS Commissioner Edward Kieswetter told EWN that almost R3 billion has been seized from tax fraudsters.

He also stated that income surpassed non-interest expenses for the first time in 15 years. SARS is now concentrating its investigations on both taxpayers and syndicates, according to Kieswetter.

According to Tax Consultancy SA, despite no rise in personal income tax rates for 2023/24, the taxman is still focusing on a limited group of taxpayers.

Meanwhile, higher tax income collections are not addressing the primary issue of government overindebtedness.

“SARS’ revenue collection was ahead of its own projections, which alone does not address the steadily increasing debt burden,” it said. “We are simply not making sufficient progress in resolving this issue.”

According to Tax Consulting SA, the government’s dependence on personal income tax remains concerningly high, as it has been for years, despite an ever-decreasing tax base. According to Kieswetter’s own statement earlier this month, the country would lose almost 6,000 taxpayers to emigration in 2022.

“Unfortunately, this means that there being no increase in the personal income tax brackets will not decrease the burden on wealthy taxpayers,” said Tax Consulting SA.

“In addition, SARS is anticipated to strengthen oversight measures in respect of these individuals to improve collection.”

Provisional allocations have been put aside for the development of SARS’ revenue-collection capabilities, including a direct allocation for capital and information and communication technology initiatives, according to the business.

To summarise, the new budget projections for this year do not necessarily promise good for the country in the short- to medium-term.

With many of the initiatives presented aimed at easing the burden on taxpayers in various parts of South Africa, taxpayers may be pleased with what they have heard in the budget.

Yet, the government appears to be addressing the symptoms rather than the disease, according to the business.

Tax brackets

Finance Minister Enoch Godongwana revised the appropriate personal income tax bands in light of the most recent budget address.

Tax bands are projected to be entirely changed by 4.9%, giving South African taxpayers some respite.

The minister also stated that the tax-free threshold has been raised from R91,250 to R95,750 when adjusted for inflation.

In terms of fiscal policy, Godongwana did not include any big tax measures in his budget.