Receiver collects nearly R500 billion

Improved tax administration has helped the South African Revenue Services (SARS) to exceed their collection targets for the fifth year running.

Trevor Manuel announced on the weekend that the total revenue collected for the latest tax year has reached R494 billion - exceeding the revised estimate of R489.7 billion announced in the budget speech earlier this year.

Manuel said the overrun would be used to reduce debt. His comments were confirmed by other Treasury staffers who indicated that government would probably retire some R39 billion worth of government bonds that were maturing this year. It is unlikely that South Africa will seek to raise more finance on international capital markets this year.

Exactly how is SARS collecting all this money?

One of the amazing truths about this record revenue collection is that most South Africans have benefited from substantial reductions in their personal income tax contributions over the same period. Manuel has continued to hand back billions of rand to tax payers, including an unexpected R8 billion in the 2007/2008 year.

Tax collection continues to exceed expectation for a number of reasons. Most notable amongst these is the impact of dedicated leadership at National Treasury and SARS. Trevor Manuel (Treasury) and Pravin Gordhan (SARS) should be commended for their continued sound management and the sense of professionalism they have instilled in the staff at their respective departments.

SARS has invested the required time and resources to ensure that administration and customer services are up to scratch. Tax forms have improved markedly from year to year - and the various customer services centres that we have visited recently operate efficiently and are manned by friendly and helpful staff. Many improvements have been made to computer systems, including such innovations as the national asset register to track property and assets for capital gains tax purposes.

These and other improvements have assisted in widening the tax net, another key focus of SARS. Attempts to add more tax payers to the revenue pool include the recent amnesty for offshore investors and the tax amnesty for small businesses. Applicants in each of these categories have to regularise their tax affairs as part of the deal, and will contribute normally in the coming years.

And finally, SARS is benefiting from their tough stance on tax evasion and improper tax practices. They are currently investigating 200 high net worth individuals to make sure their tax records are in order. Both individual and business taxpayers know that they have to keep their tax affairs in order. They might be able to take a chance with the police or traffic departments - but they know better than to mess with SARS!

Tougher times ahead - we think not!

All good things have to come to an end. Gordhan is on record that SARS will be hard pressed to achieve a record sixth revenue collection overrun when numbers are released 12 months from now.

We believe that all things being equal, SARS will easily exceed its collection targets in the coming year. Consumer spending remains buoyant despite threats of rising inflation and possible interest rate hikes. Improvements in employment numbers also bring more taxpayers to the system each year. This means income tax and VAT collections should show continued growth. Some concern is that local companies will be under pressure to perform as strongly as in recent years - and that their tax contributions will taper off slightly.

However, South Africa's continued robust GDP growth of near 5% should ensure that another record year for revenue collection is on the cards.

Editor's thoughts:
SARS has employed a number of creative methods in their attempt to widen the tax net. The first was a general amnesty to individual taxpayers with 'illegal' offshore investments and the second (currently underway) is a general amnesty for small businesses. Do you think tax amnesties are fair to ordinary taxpaying citizens? Send comments to gareth@fanews.co.za