Kieswetter wants SARS excluded from budget cuts

South African Revenue Service (SARS) Commissioner Edward Kieswetter says that the revenue service should be excluded from any across-the-board austerity measures that could be introduced in the coming budget, as this would pose a threat to the country’s “fiscal integrity”.
The statement comes as National Treasury falls under increasing pressure to balance South Africa’s books. Revenue collections have fallen short of the targets set in the February Budget, while government spending has also ballooned beyond the estimates set out by the department.
As a result, South Africa’s budget deficit has widened, with many economists, analysts and officials anticipating drastic measures in the mid-term budget to be presented to address this. It has been widely reported that the Treasury is drafting a host of proposals, which include budget cuts across the board.
Kieswetter said that budget cuts at SARS would work against the positive strides that have been taken at the tax office, especially undermining the digitisation and automation processes that have yielded significant results for the country’s tax revenues.
“Once you suspend funding, the end result will always be the suspension of innovation and regression against the progress of other administrations. This goes against the intrinsic value of digitalisation in improving tax compliance and detecting tax non-compliance,” Kieswetter said.
Addressing the 2nd Network of Tax Organisation (NTO) Technical Conference – which took place under the theme: ‘Digitalisation of Tax Administrations and Contemporary Issues’ – Kieswetter pointed to further investment in digital capabilities as being virtually non-negotiable.
“As more financial transactions are taking place digitally, more third-party data sources are shared with tax administrations, and central bank digital currencies are emerging, the importance of digitalisation and consequently the use of data science and artificial intelligence have become central to revenue collection, compliance and trade facilitation.
“So, in short, whenever budget cuts are required, National Treasuries – Budget Offices are advised to avoid across-the-board cuts and ensure a more prudent approach to invest to build enabling and productive economic capacity, create employment, and thus expand the tax base.
“This secures fiscal integrity and sovereignty in the long run. Tax administrations should be excluded from across-the-board austerity measures. The investment in digitalisation should not be disrupted. The cost of recovery is simply too high in every respect,” Kieswetter said.
The Commissioner added that, since the introduction of auto-assessments, more than R70 billion of tax-related crimes had been prevented with the upgraded digitalisation of the SARS’ systems.
Although this shows that progress has been made, he explained that much more still needs to be done, as the revenue service is still behind in its digitalisation journey.
“I want to pause here and focus on one element as a critical enabler of the digitalisation journey – and that relates to funding. Before state capture, SARS was a leader in digital modernisation for many years.
“However, partly due to financial constraints, but also a short-term approach, budgets were then frozen for a number of years, and SARS fell behind in driving technological innovation.
South Africa has now managed to restore some additional funds to continue our modernisation, but we are still substantially underfunded to move at the necessary speed in an environment that is changing exponentially, business models are being disrupted, and tax crime proliferating at an alarming rate,” he said.
SARS faces the challenge of not only having to play catch-up after many years of underinvestment but also of accelerating modernisation simply to remain relevant.
“We are at a point where we can again focus on innovation. The important lesson here is that the digitalisation journey is not a finite project but a new way of being.
“Once you suspend funding, the end result will always be the suspension of innovation and regression against the progress of other administrations,” the Commissioner said.