The South African Revenue Service (SARS) is focused on collecting the ‘lowest hanging fruit’ to help close South Africa’s tax gap, including increased compliance and broadening the taxpayer base, says commissioner Edward Kieswetter.
“Our position as SARS is that the lowest hanging fruit is still collecting the taxes that are due, closing the tax gap and broadening the base,” he said, addressing the national tax indaba on Monday (20 September).
Kieswetter said that the revenue collector’s focus on ‘easy wins’ does not mean that there is no scope for new policy initiatives, however. “These can never be taken off the table. There is still too much inequity in the world and too many practices that favour large corporates and the wealthy,” he said.
Kieswetter said that some of the policies which had previously been mooted include:
- The introduction of taxation of the digitalisation of the economy;
- The global discussion around a minimum corporate tax;
- The ongoing discussion about placing wealth taxes back on the table.
“While some of you may say that these are knee-jerk reactions, they are reactions to the reality of the levels of abuse of the tax system that still exists. So these (policies) can never be taken off the table.
“But in South Africa, we believe that there is still so much that can be harvested from the taxes that are due, and the rebuilding of SARS is essential.”
Tax experts at the indaba said the country’s tax gap is sitting at R200 billion or 4% of the GDP, the SABC reported. The tax gap is the difference between the taxes that should be payable and tax collected.
“In today’s numbers you are looking at R40 billion-plus on VAT side and frighteningly they estimated that corporate tax gap from corporate is around 2% of the GDP,” said Kyle Mandy, tax policy leader at professional services firm PwC.
“So, we talking about R100 billion in corporate tax, and from personal income tax, there was a study done by Stellenbosch to around about R46 to 50 billion. If you look at the three we are already getting to R200 billion in terms of the tax gap.”
Kieswetter said that early signs show that there has been increased compliance as part of initiatives to reduce the tax gap, and that this will ultimately remove the temptation by the government to look at other ways to raise revenue.
He added that increased focus on taxing electronic services, government suppliers and South Africans with funds overseas have also assisted in closing the country’s tax gap.