SARS needs to tread carefully with taxpayers: CEO
While the South African Revenue Service (SARS) is touting its improved tax revenue collections, especially from wealthy taxpayers, the sustainability of its tactics has come into question.
Hannes van den Berg, the CEO of Consult by Momentum, said that the SARS commissioner Edward Kieswetter has been beckoning consumers to share their tax affairs with SARS while still initiating tactics to target high-net-worth individuals and corporates.
Van der Berg said that Consult is also seeing SARS take no prisoners when it comes to addressing indirect tax loopholes.
“While Kieswetter has said that SARS’ main objective is to improve administration competence and not increase the burden on taxpayers, it seems to have its eye set on those who are looking to move abroad, becoming far more stringent in its legislation concerning assets leaving the country,” said Van der Berg.
SARS has also made clear its intention to identify more ‘low-hanging fruit’ to bolster its coffers through auditing cases of ‘unexplained wealth’. So perhaps think twice about sharing your fancy new ride on social media if you don’t have your tax affairs in order, he added.
However, despite the intentions for better tax collection, people in South Africa will continue to feel as if they are paying too much each month – making full tax compliance less sustainable, Van der Bergh warned.
South Africans may question the latest tax levels, particularly given that people face mounting pressure – load shedding, unemployment, escalating food and fuel costs and lack of service delivery, to name but a few – and are becoming increasingly frustrated.
Van Der Berg questioned if the country has reached its tipping point in tax levels before taxation starts to reduce the total value of tax revenue collected – either through evasion or avoidance. This phenomenon is known as the Laffer Curve.
According to Van der Berg, the country’s tax-to-GDP rate is expected to hit 25% in 2022/2023 – on par with many developing nations.
The South African Institute of Chartered Accountants (SAICA) previously noted that “a high tax-to-GDP ratio is not a problem where taxpayers are receiving good value for their money; however, this is not a reality currently in South Africa.”
As a result, while taxes might be on par with other developing countries, people will always feel that they are paying too much if they do not see the value in it, Van der Berg said.
“Moreover, due to rising unemployment, our taxpayers face a high tax burden, which is to say that a small pool is responsible for driving the country.”
While a tax revolt is not likely, emigration is expected to increase.
During 2022, over 6,000 taxpayers emigrated – decreasing the overall tax pool. Kieswetter did not seem fazed by this despite most of them being young professionals poised to likely become future taxpayers.
“Ultimately, the higher the tax-to-GDP ratio, the slower our country’s progress. We want to see people becoming richer and having more disposable income to spend. This is what speeds up economic growth,” Van de Berg said.
The CEO said that the upcoming budget speech by finance minister Enoch Godognwana (22 February) would again be a balancing act.
The government will continue with the social relief of distress grant, which will need to be funded from somewhere, said Van der Berg.
“Given the pressure on consumers, this is unlikely to be in the form of personal income tax or corporate tax, and so the shortfall will probably be made up through indirect and sin taxes.”
“The minister must show how funds will be allocated to address unemployment, and South Africa will be watching to see exactly how the country plans to double down on crime, which, if successful, would no doubt boost our tourism,” he added.
Read: Make sure youdon’tt fall into this trap when SARS comes knocking
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