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You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: The target was R2 trillion, as set by the minister of finance. That target was levied on the South African Revenue Service [Sars] for revenue and tax collections over the last financial year. We\u2019re going to be reflecting on this target with Sars Commissioner Edward Kieswetter and taking a look at whether that target was reached.<\/p>\n
Commissioner, good evening. Lovely to have you on the show, as always. Thanks so much for taking the time. [You are] arguably the most over-achieving commissioner we\u2019ve had in recent times. I just had a quick look at the previous collections of the South African Revenue Service, or Sars. Each year under your tenure has exceeded expectations. Now I can safely say that you are an \u2018over-achieving\u2019 commissioner, because I\u2019ve had the privilege of knowing that you are but one of more than 14\u00a0000 Sars employees that are hard at work to ensure that these targets are met, and the responsibilities that you\u2019ve borne over the last seven years have not been yours alone.<\/p>\n
Take us through the year that was and how Sars performed.<\/p>\n
EDWARD KIESWETTER: Thank you. Firstly, thank you for the acknowledgement.<\/p>\n
We always knew when the minister set us the aspirational estimate \u2026 it would be difficult because our economy clearly is sluggish and we\u2019re facing many headwinds. We had a bit of buoyancy from the commodity prices, but very small \u2013 R5\u00a0billion to our estimate. The real benefit may come through in this year.<\/p>\n
And then that also depends on what happens in the war [in Iran] because the disruption of trade routes, the increase in fuel prices and the knock-on effect are still to be determined.<\/p>\n
But coming back to Sars, what was really pleasing is that the efforts by the staff [in themselves] contributed R316\u00a0billion. That\u2019s when we say our effort to succeed does not require one big thing. It requires many, many little things to go right.<\/p>\n
I think that\u2019s the story of an institution that works like a system, as opposed to a set of disconnected transactions. That\u2019s really a reflection of the work of the last seven years.<\/p>\n
When I look at the actual taxes, of course the significant contribution still comes from individuals, followed by Vat, thirdly customs, followed by excise.<\/p>\n
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Company taxes are actually only R350\u00a0billion of the over R2\u00a0trillion, and often companies are mentioned as the real heroes. But the real heroes are ordinary people who buy and contribute to Vat, to excise, consumption taxes, et cetera.<\/p>\n
So all my appreciation goes to the ordinary man in the street with whom we engage and who makes this contribution.<\/p>\n
When you look at companies, though, we see that the financial services sector is still the most significant contributor, followed by the community social and personal services sector. Of course, Customs and Excise is a big contributor \u2013 but that\u2019s across all sectors.<\/p>\n
And if you look at the mining sector, their contribution this year has been only R25.5\u00a0billion, even though the year-on-year growth has been 112%. Given the uptick in the commodity cycles, the absolute contribution is still relatively small.<\/p>\n
So we are pretty confident when we say that it was a number of many little things that worked well that ultimately delivered the excellent and, by the way, historic performance, because this is the first time that we\u2019ve crossed the R2\u00a0trillion mark.<\/p>\n
JIMMY MOYAHA: Commissioner, as we reflect on that record that has been set, you mentioned something around the contributions towards those collections from a commodities boost, from a company\u2019s perspective. I want to get your sense on how much of this has been consistent improvements and compliance improvements \u2013 something that you and I have spoken about before, to say that a lot of the adjustments that Sars has been looking at, everything from the modernisation programmes to the added initiatives, has been in an effort to strengthen the institution as a whole and not necessarily rely on one-off collection improvements.<\/p>\n
EDWARD KIESWETTER: It\u2019s incontestable, because if it were true that Sars does well only when the commodities boom, why has our performance been consistently improving throughout the business cycle?<\/p>\n
That tells you that the revenue performance of Sars is not cyclical, it is structural.<\/p>\n
Where does that structural improvement come from? It comes from building a solid operating model that requires the work of diligent, professional and competent people, the deployment of a technology platform that creates an engaging interface between us and taxpayers, and a deep commitment to data science and sophisticated algorithms and AI that we have deployed.<\/p>\n
Collectively, that, during the seven years that I have had the privilege to lead Sars, in itself has contributed R1.6\u00a0trillion and, within that, over R600\u00a0billion from AI risk-detection methodologies that we\u2019ve built here.<\/p>\n
Right here at home our teams have built this AI, and that has prevented the outflow of impermissible or fraudulent Vat and other refunds of well over R600\u00a0billion.<\/p>\n
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If you look at that, following up on over three million individual tax outstanding-return cases for an amount of anywhere from R200 to R800\u00a0million \u2013 or a billion rand \u2013 from conducting verifications, from conducting investigations, cargo inspections and interventions.<\/p>\n
What we have seen is that our overall compliance index has gone up by about five percentage points.<\/p>\n
And very pleasingly within that our payment compliance now stands at 75%.<\/p>\n
So it is the system that has strengthened, and that\u2019s also what gives us the confidence that it is sustainable. It\u2019s not just a flash in the pan or a reflection of the commodity cycle.<\/p>\n
Importantly, we have also averted, through incontestable evidence, the need for the minister \u2013 at least in the near term \u2013 to have to look at Vat increases.<\/p>\n
JIMMY MOYAHA: Commissioner, as we close off this collection period on a high at that record R2\u00a0trillion-plus mark, I want to get your thoughts on where that figure could have been if we had managed to rein in things like the illicit markets that we\u2019ve been discussing and battling through. This is something I know that has been very close to your focus as the commissioner, as part of the teams that you\u2019ve led, and you\u2019ve emphasised on many an occasion that we\u2019re losing out on revenue because of the illicit markets. Where would this figure have been if those illicit markets had been even a fraction smaller than what they are now?<\/p>\n
EDWARD KIESWETTER: Well, the research converges with consensus that the shadow and unrecorded economy \u2013 of which the illicit economy is a subset \u2013 is between 10% and 15% of GDP, which means that the under-collected tax is anywhere between R600\u00a0billion and R800\u00a0billion.<\/p>\n
We have been quite conservative to say that if we address the illicit economy, the annual revenue recovery can be between R65\u00a0billion and R100\u00a0billion.<\/p>\n
And that\u2019s been our persistent plea to the minister \u2013 to say \u2018Look at Sars as an investment centre, not a cost centre\u2019.<\/p>\n
I think this year we\u2019ve demonstrated that; with the additional money in terms of the debt-recovery project. Our debt collection this year that we\u2019ve reported was R111 billion.<\/p>\n
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And so to your question, where could we have been?<\/p>\n
Well, even if we made the overall tax gap as reported by the Davis Tax Commission Committee, our own and other scholarly works say that we have between R350\u00a0billion and R600\u00a0billion. And that number is already dated. But even conservatively, if we could, say, take R500\u00a0billion, and were able to get 20% of that collected, you\u2019re adding another R100\u00a0billion into the fiscus.<\/p>\n
JIMMY MOYAHA: Commissioner, as we end the conversation and as we come to the realisation that this might be the final conversation that we have with you as the Commissioner of the South African Revenue Service, what is your final message to South Africans, reflecting on a stellar seven years as commissioner and as custodian of one of our proudest institutions?<\/p>\n
EDWARD KIESWETTER: First, this has been an inordinate privilege and a humbling opportunity for me to have been given this assignment by the president in 2019, then, throughout this period, the engagement with taxpayers. Many have been tough, but overwhelmingly we have built trust from 48% to 75%, and taxpayer engagement is better than it has ever been.<\/p>\n
So my message to taxpayers is to say: \u2018Thank you for the trust you\u2019ve placed in us. Thank you for your contribution to the improvement in revenue collection and compliance.\u2019<\/p>\n
But most importantly, as I hand over the baton, I urge every South African to be an activist, a democrat, and not to stand by whenever in the future [there might be] a similar attempt to what happened in the mid-2010s for an institution like Sars to be captured and used as their own by a leadership that is corrupt.<\/p>\n
South Africans should stand up and say \u2018This will never happen again under our watch\u2019.<\/p>\n
It is democracy, it is agency by individuals who ultimately make or break our democracy.<\/p>\n
JIMMY MOYAHA: That country and that democracy. Thank you, Commissioner Kieswetter, for the service that you have rendered on behalf of all South Africans and on behalf of those that have entrusted you with that role.<\/p>\n
That was the Commissioner of the South African Revenue Service, Edward Kieswetter, joining us to reflect on the latest financial year of Sars\u2019s tax collections and indeed on a seven-year tenure as commissioner.<\/p>\n
#R2trn #tax #record #taxman<\/p>\n","protected":false},"excerpt":{"rendered":"
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