SA Revenue Service (Sars) Commissioner Edward Kieswetter told Parliament that more stringent systems needed to be put in place to stop the defrauding of customers seeking refunds as criminals were taking advantage of the same systems that gave the entity an edge in processing refunds.
Briefing the Standing Committee on Finance on Sars’ financial report for the 2022/23 year yesterday, Kieswetter said the organisation had been able to control R61 billion in refunds, which could have been lost had systems not been tighter.
He said criminals were always trying to gather personal details of clients for prospective refunds and were able to gather personal information to pretend they had been mandated by Sars.
“The introduction of powerful capabilities to enable us to conduct business have unfortunately given criminal elements the opportunity to communicate with each other to do sweeping profiles on people and gather their personal information,” he said.
Kieswetter told Parliamentarians that Sars needed funding certainty for the tax authority, notwithstanding the fiscal austerity imposed by the National Treasury as a result of weak economic growth and lower revenue collection. Sars’ grant from the government in 2022-23 was R11.6bn and it was allocated R12.2bn for 2023-24.
Sars reported a 7% net core loss of R231bn in the financial year.
Quizzed on the projected economic growth and Sars revenue collection targets, Kieswetter said the organisation tried the best it could and also accelerated its potential where possible.
He was taken to task on Sars' employment targets with EFF MP Mzwanele Manyi questioning the organisation's racial profile in senior management, which he said did not correspond with the population dynamics.
Manyi said of Sars' 457 executives in the top tier of management, black Africans were under represented by 70% against the population grouping, coloureds at 32 under were represented by 7%, Indians at 65 formed 14% of Sars' management whereas they made about 3% of the population.
“There is under-representation of Africans and coloureds but there is no shortage of qualified people of these races, it seems there is a deliberate glass ceiling for black Africans and coloureds," Manyi said.
Kieswetter also reiterated the problem of underfunding of the tax authority, which he estimated at more than R20bn over the Medium-Term Expenditure Framework.
In any one of the years Sars had a shortfall of between R6bn and R8bn.
The commissioner has previously pointed out that the funding of Sars should be regarded as an investment that generates returns in terms of better revenue collection. Kieswetter said the issue of under-funding had been discussed with Finance Minister Enoch Godongwana to try and avoid Sars having to use its capital funds, in some cases for short-term projects.
“I have addressed this issue with the minister and with the director-general of Treasury that Sars must be given the assurance of funding over a three- to five-year period,” he said.
Kieswetter said he understood that the country was undergoing austerity measures, but highlighted the need for an institution such as Sars to invest in its human capability as well as in data science and technology.
The tax authority’s baseline budget had never been restored after R1bn was removed from its funding in 2014-15.
“This has never been corrected,” he said. “Whatever the escalation is, it has been on a base that was deliberately reduced in 2014-15.”
Kieswetter highlighted the positive returns of Sars’ compliance work. Whereas the compound annual growth rate in Sars revenue collection over the five years since 2018-19 was 7% to R2.07 trillion in 2022-23, the growth in revenue from compliance activities was 21.76%, from R128.4bn in 2019-20 to R231.8bn in 2022-23.
Revenue from compliance work contributed 13.7% to overall revenue in 2022-23. He noted that low levels of compliance persisted across the entire tax base and targeted efforts at enforced compliance were necessary.
Kieswetter noted that a survey conducted during the past year found that public attitudes towards compliance was 76.5% while public trust in Sars was 66%.
Sars received a clean audit from the auditor-general on its 2022-23 financial statements.
“This means the compliance effort of Sars is filling the gap of what is lost when economic assumptions are adversely adjusted. We believe that were it not for the compliance effort and the resultant revenue, our revenue shortfall would be significantly worse,” Kieswetter said.
Sars finalised 248 criminal investigations during the year, which were handed to the National Prosecuting Authority.
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