One often reads reports stating that the South African Revenue Service (SARS) could collect R800 billion in unpaid taxes. How did SARS arrive at this figure?
SARS Commissioner Edward Kieswetter answered that question at a joint meeting of Parliament’s Standing Committee on Appropriations, Select Committee on Finance, Standing Committee on Finance, and Select Committee on Appropriations on 14 March.
One component of the R800bn is the “tax gap” – the difference between the total amount of taxes that taxpayers are legally obliged to pay and the amount that is actually paid on time.
Kieswetter said SARS loses about R60bn because of unpaid excise duties, and it loses about R86bn because of illicit trade flows. But the largest loss – according to the Davis Tax Committee – is from unpaid VAT, at R195bn.
The next component is what Kieswetter described as “aggressive tax planning” – base erosion, transfer pricing, and other ways of masking wealth that cross the line between allowable tax-avoidance measures and tax evasion. SARS estimates its current loss is between R300bn and R560bn.
Finally, there is what SARS calls its “balance sheet items” or “stock of uncollected debt”, as well as outstanding tax returns.
Kieswetter said there are more than 54 million outstanding returns going back many years – “not all of whom we will collect because many things have changed”.
SARS has just over R400bn of undisputed debt on its current debt book – again, not all of that will be collected. And SARS has just over R100bn of debt that is currently under dispute.
“If we add that up, you can see how between R700bn and R800bn is not an unreasonable amount that we use as a reference,” Kieswetter said.
He said if SARS successfully collected only 30% of the money it is owed, it would bring in more than R200bn. This is why it asked Minister of Finance Enoch Godongwana for additional funding.
And the minister agreed, allocating an extra R4bn to SARS over the next three fiscal years to increase its ability to collect tax revenue.
Kieswetter said R2bn of the additional R2.5bn that SARS will receive for 2025/26 will be used for “a massive debt recovery programme”.
SARS has seen “a significant success in how we can have a multiplier to the investment that we’ve asked the minister to make”, and SARS will share more information about “these positive results” at the end of March.
R500 million will be used to modernise SARS’s systems “because we cannot pursue these areas of abuse without deep investment in technology systems, in the deployment of artificial intelligence (AI), on the automation of routine work, building and increasing our risk-detection methodology”, Kieswetter said.
As a result of deploying AI, he said SARS knows there are at least 30 000 individuals whose economic activity is greater than R1m but who are not registered for tax. SARS also knows there are at least one thousand taxpayers who were previously marked as not required to file a return but whose economic activity has subsequently increased, and so they should be filing, but they are not.
“So, you can see that the areas of work that we think we need to focus on are known. The capacity to do that work is insufficient,” Kieswetter said.
SARS attacks many pensioners and frail persons who cannot use cell phones or pay tax due to Sars inefficient systems
For example Mr RW has a tax number and reference number but it bounces every time. He is very ill with cancer etc. SARS sends letters by post. RW cannot go to SARS. Phone and cell and email contacts fail.
SARS should wake up!
How much is Re5
The exam fees are set by the Financial Sector Conduct Authority. The current fee to write the exam is R1 300 (VAT inclusive) per examination per candidate.