Revenue collection shows resilience despite tough economic times

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Revenue collection has shown resilience despite the difficult economic environment. South African Revenue Service (SARS) says it has collected a net amount of R1. 741 trillion which is R54 billion more than last year’s collection. This represents 3,2% growth in revenue collected.

Revenue collection growth was driven mainly by Personal Income Taxes, while corporate income taxes contracted. In terms of gross revenue collected, SARS collected R2.1 trillion, representing 4,2% growth.

Refunds increased to R414 billion, leaving net revenue collection at R1,74 trillion.

Personal income tax contribution grew by 8. 2%, and Corporate Income Tax contracted by 8.9%.

Structural constraints hindering economic growth are visible in the trends in revenue collected by SARS.

The mining sector contribution contracted the largest as it deals with low commodity prices, logistics inefficiencies and electricity supply challenges.

“The real area of contraction that we are concerned about is CIT. While we have seen good growth in sectors like the finance sector and the electricity sector, we have seen contraction in the mining sector, year-on-year and in the manufacturing sector. In fact mining sector is significant as a result of a slowdown in commodity prices, load shedding and challenges at the ports and rail and generally, the logistics sector. And unless that enabling infrastructure is fixed, we are going to continue to constrain growth in the manufacturing and the mining sector,” says Edward Kieswetter, SARS Commissioner.

SARS, however, says it’s concerned about refund fraud and abuse. The revenue agency says it was able to prevent the outflow of R101 billion of impermissible refunds.

“We see more instances of individuals who register for VAT even though they are below the minimum threshold of a million rand and very often we find different entities that register, but linked to the same persona, which is a clear demonstration and fraudulent intent. We see companies that are created, bought as a shelf company already registered for VAT that have no intention to operate. They simply claim input VAT and after 4-5 months they disappear,” Kieswetter added.

SARS says the ban of tobacco and alcohol products during the COVID pandemic has exacerbated illicit trade and loss of revenue.

“It is generally a crime of organised corruption. organised tax crime requires a number of players both in and out of SA. We have one huge case at the moment that involves professional enablers, institutions that ought to be respected that are at the scene of crime that ought to know that there is money laundering taking place, who remain silent, who simply do the minimum FIC reporting that don’t really look at the real risk that underlies the transaction. We find cross-border companies, professional enablers, past employees of SARS, employees within law enforcement agencies, that are aware of and enabling,” Kieswetter explains.

The revenue collector says going forward it will deepen work on dealing with the illicit economy with focus on Illicit tobacco, fuel, and financial flows, base erosion and profit shifting as well as VAT Fraud and other tax crimes.

Video: SARS Briefing – Preliminary revenue outcome for 2023/24: Edward Kieswetter