Don’t stop paying tax, vote for a better government, says Sars commissioner

If South Africans do not believe they are getting value for their taxes, they should vote in a new government, says Edward Kieswetter, the Commissioner of the South African Revenue Service (Sars).

During PSG Konsult’s Think Big Series on Tuesday, Kieswetter was asked for his views on taxpayers revolting because many believed the government was not spending their money properly. Indeed, they were being “double-taxed” because they were having to fund services that the government was supposed to provide using taxes.

He said most South Africans were rightfully unhappy about the lack of service delivery, particularly the disruption caused by load shedding. However, he said the solution was not to withhold taxes but for South Africans to be “activists” and use the democratic system to bring about change.

If this government does not deliver, it should not be the governing party, Kieswetter said.

“It is our democratic principles, not governments, that will ultimately deliver the South Africa that we want.”

He said people were tired of hearing excuses for the lack of service delivery. However, he believed most South Africans were moderate and would think “long and hard” before joining a tax revolt. Most understood that withholding taxes would hurt the people who should be protected via state-funded services and grants.

Kieswetter said that when he spoke to government ministers, he did not hold back about where he thought the government was failing and letting itself down.

The government was put into power to address inequality, poverty, poor education, and low economic growth. The victory over apartheid was an important milestone, but currently the most pressing issue was service delivery and changing the living conditions of South Africans for the better. If the government could not do that, it deserved every criticism it received, Kieswetter said.

Asked why the government was failing to deliver, Kieswetter said, in general, it was less about a lack of political will and more an issue of competence.

Based on his experience as head of Sars compared with what he experienced as a chief executive in the private sector, Kieswetter said the state was hamstrung by red tape.

Regardless of the intent of the Public Finance Management Act (PFMA) and other regulations, he said they have created inefficient procurement processes and recruitment practices. Things that should take a day or two end up taking months.

Kieswetter said that one of his biggest frustrations was the inability to make a decision that was clearly the right thing to do, because the framework in which he operated was designed to constrain, not create the freedom to act.

What particularly irked him was that neither the PFMA nor the other regulations prevented the “wholesale corruption” between the private and public sectors during Covid-19.

“Literally billions of rands were stolen by political elites working and colluding with the private sector to defraud the fiscus […] We cannot ever sit back and say, that’s fine because we’re fighting a noble cause.”

Tax breaks for alternative energy?

Asked for his views on providing tax incentives or rebates for residential electricity generation and alternative energy solutions, Kieswetter said tax policy was the domain of the government, specifically National Treasury.

However, speaking in his capacity as Sars commissioner and as a citizen, he said the government should review what measures could be introduced to provide some relief from load shedding and incentivise people to become more self-sufficient.

At the same time, he said it was often “not a good idea” to use taxes “to correct a particular behaviour”.

The last amendment to policy in respect of renewable energy was made in 2016, when companies were allowed accelerate the depreciation on renewable energy over one year, which effectively means a 28% discount on their investment.

“When that was introduced, we would not have known or been aware of the extent to which the energy crisis would have regressed and what other instruments we would need to respond to it,” he said.

No new taxes?

Kieswetter said load shedding has had a huge impact on the economy, and Sars expected it would have a material impact on its ability to reach its revenue collection target of R1.86 trillion. Also, during times of crisis, there is an increased temptation to withhold taxes. However, Sars “will leave no stone unturned”.

The previous and the current ministers of finance have said the country should aim to reduce taxes for companies, in line with international norms, Kieswetter said.

Although no government can dismiss the idea that additional expenditure may create pressure to raise taxes, “our mindset is to improve administrative competence, and not increase the burden on taxpayers, including the wealthy”.

If Sars ensured that every high-net-worth person in South Africa pays tax at the level they are supposed to be paying, “there is no need for a knee-jerk reaction about wealth taxes”.

He said Sars has “many low-hanging fruits” to improve revenue collection, which has been buoyed by the occasional uplift in the mining or the financial sector.

“The real benefit for us is the significant growth we have seen in what we call the compliance dividend, meaning the additional revenue we collect, notwithstanding economic conditions, that comes just from resiliency, from focused effort […] to make sure that every cent that needs to be collected is collected.”

He said Sars was of the view that the compliance dividend has reduced the pressure or the need for any other taxes.

Impact of emigration is ‘overstated’

Regarding South Africa’s supposedly shrinking tax base, Kieswetter said the impact of emigration was “overstated”.

Last year, just more than 6 000 people left, and it was “a lot lower” at the top end of the tax bracket, he said.

It was necessary to obtain a better understanding of the quantifiable impact of emigration. However, the soft impact – such as damage to the country’s reputation – was high.

“Every South African who leaves because they have lost confidence in the system is bad for us. But the overall fiscal impact is not what some media sensationalises it to be. [It was] not be dismissed or trivialised, but I think let’s just put it where it belongs,” he said.