South Africa’s finance minister recently launched a probe into the South African Revenue Service (Sars) after figures showed tax revenue was expected to fall ZAR50.8bn (£2.7bn, €3.16bn, $3.7bn) short of the 2017 budget estimate of nearly ZAR1.27trn.
Key strategy
In response to the probe, Sars is now looking to bring back tax courts and use them as a key part of its enforcement strategy going forward, according to news website Moneyweb.
Randall Carolissen, Sars’ group executive for research, is reported as saying the courts were needed as the general criminal justice system and its courts did not make tax matters a priority.
Local tax courts previously operated in South Africa but closed down several years ago.
Among other things, the courts would be able to prosecute taxpayers for the non-submission of tax returns or for the filing of false information.
Wouter Fourie, director at Ascor Independent Wealth Managers, told International Adviser by reviving the tax courts the government would be able to fast track prosecutions to bring in more revenue.
“They are also focusing on offshore money and will laisse with external parties to assist in providing information to prosecute more people,” Wouter said.
“They are very concerned about their PAYE and VAT taxes – where businesses are using it to fund cash flow,” he said.
If the tax courts are introduced, Wouter said Sars will still face the challenge of the informal tax revolt where people are bartering in goods and services and thereby avoiding the tax system completely.
Enforcement strategy
Carolissen told Moneyweb that multiple factors influence Sars’ ability to collect tax revenue.
The performance of the economy is believed to be the biggest contributor to tax collection, Carolissen said, while policy reform, collection efficiency and compliance also play key roles.
“Up until now, Sars has probably been leaning too much on its service and education arm of its compliance strategy and less so on its enforcement arm.
“I’m afraid that we will have to look at that mix and probably be looking very carefully at those people that are cynically refusing to pay the taxes because they are dissatisfied with government,” Carolissen said.
According to government data, Sars collects 90% of the nation’s tax revenue.
Earlier this year, the government introduced a tax amnesty on undeclared foreign assets, a move the government hoped would yield billions of rand in additional revenue.
However it was soon labelled a flop and only brought in a tenth of the revenue the government was hoping for.
