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The easiest collection job ever

17 April 2008 Gareth Stokes

We’ve all had some experience with debt collection in our time. You know the basic scenario… A client receives goods or services from you – conveniently forgets to pay – and then forces you to jump through any number of legal hoops to squeeze out a single rand. Imagine if your collection department had the overreaching powers of search and seizure that the South African Revenue Services (SARS) enjoys. Your staff would have the easiest collection job ever.

South African taxpayers are quickly learning that crossing SARS is a bad idea. That’s why finance minister Trevor Manuel is able to make statements like “The robustness of the South African economy and the efficacy of our fiscal institutions have once again been confirmed by the revenue collection efforts of SARS…” He was commenting on yet another year of overruns as SARS again exceeded their revenue collection targets. This type of ‘over achieving’ has become a SARS trademark under the leadership of Pravin Gordhan (Commissioner for the South African Revenue Service) and Manuel over the last decade.

A great domestic performance

When Manuel announced the 2007/2008 budget in February last year his estimate for tax revenue was R556.6bn. This estimate was revised in February 2008 to allow for the collection progress already made. Manuel lifted the target by R15.2bn to R571.06 at this time. And true to form when the final figure was announced at the beginning of this month SARS had managed to squeeze another R0.8bn out of taxpayers.

Manuel was full of praise for the domestic economy. He said the collection results “confirm the continuing expansion of our economy, and the growing strength of the partnership between SARS and taxpayers.” The main factors assisting SARS to achieve its revenue targets included South Africa’s GDP growth of 5%, massive growth in fixed investment spending and higher levels of employment.

There were challenges which made the revised target of R571.06bn a tough ask. These included higher inflation and interest rates and a slowdown in domestic consumption. “It required that SARS staff had to develop and implement extraordinary measures to identify the monies rightfully owing to the fiscus and actually collect these amounts,” said Manuel. How did SARS agents go about their jobs? You might be interested to know that they made 300 000 telephone calls to the public in March this year. And these calls (directly or indirectly) netted another R5bn from taxpayers. That’s an average of R16 600 per call which must put SARS telephone agents in a league of their own where debt collection is concerned.

The man in the street shoulders the largest burden

Whichever way you look at the numbers, you and I still shoulder the greatest share of the tax burden. In the 2007/2008 tax year Personal Income Tax amounted to R169.104bn… Value Added Tax (VAT) which is paid by individuals and businesses was the second biggest category with R149.653bn. Company Tax and Secondary Tax on Companies came in at R143.048bn and R19.972bn respectively. And the only other tax that’s getting a mention is everybody’s favourite the Fuel Levy. This contributed R23.480bn to government coffers. Wouldn’t it be great if the entire Fuel Levy could be applied to the upgrade and maintenance of the country’s transport systems! The entire budget for Transport in the 2008/2009 year is a trifling R16.543bn

It’s interesting to note that “the R169.104bn in revenue for Personal Income Tax exceeded the printed estimate of R156 billion by R13 billion…” Tax collections from private individuals thus accounted for almost the entire overrun on Manuel’s initial estimate. This was attributed to a larger number of taxpayers, an approximate 11.7% growth in income and approximately 2.4% increase in the number of employed. The ordinary South African is certainly playing a part in keeping the wheels of this country in motion.

Editor’s thoughts:
Manuel has once again raised the stakes for the 2008/2009 budget. He expects SARS to collect R642bn in the current period. Do you think SARS will have any trouble meeting its 2008/2009 tax collection target? Add your comments below, or send them to [email protected]

Comments

Added by Jacqui, 18 Apr 2008
I agree with Jeff. The problem in this country is that the gmt does not know how to spend money wisely. Despite the fact that we the citizen skeep the wheels of tthis country in motion, we are the least respected. It is infuriating that the government agency employees have such bad attitudes and exhibit such arrogance. This is true for the SAPS, City councils, home affairs, etc. Yet it is us, the
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Added by Jeff, 17 Apr 2008
Our problem in SA is that the Trevor Manuel does not know how to spend the money. He should employ my wife - she could easily teach him how to spend it all (and more) The minister should be very sad that there is a surplus collection - we are a developing nation and we should be spending more than is collected so we can develop.
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