South Africa loses between R200 billion and R300 billion in tax collection due to the rise of criminal syndicates that avoid tax. SARS Commissioner Edward Kieswetter revealed this in a Business Times interview.
Kieswetter said he is not deeply concerned about small, local tax revolts turning into widespread national revolts as people are increasingly fed up with poor service delivery from the government.
“My biggest concern is a proliferation of syndicated crime. This is of more concern to me than little fires of tax revolt,” Kieswetter said.
However, this does not mean that tax revolts do not concern Kieswetter. They are simply not his most pressing concerns.
Kieswetter believes tax revolts will have more political than financial consequences for the country.
On the other hand, criminal syndicates cost the country much more in lost tax revenue, with hundreds of billions being lost yearly.
“We are aligned with the Davis tax committee, which says the value at risk from syndicated crime is easily between R200 billion and R300 billion a year,” Kieswetter said.
This is partly due to a lack of high-profile prosecutions, indicating that SARS did not escape the era of state capture unscathed.
“SARS is significantly underfunded to make the investment in modern technology and data science required for us to make a meaningful impact,” Kieswetter said.
Kieswetter previously said the revenue service should be excluded from any across-the-board austerity measures that could be introduced in the coming budget, as this would threaten the country’s “fiscal integrity”.
Budget cuts at SARS would work against the positive strides taken at the tax office, 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,” Kieswetter said.
“This goes against the intrinsic value of digitalisation in improving tax compliance and detecting tax non-compliance.”
“So, in short, whenever budget cuts are required, National Treasuries and 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 cost of recovery is simply too high in every respect.”
Since introducing auto-assessments, the Commissioner added that more than R70 billion of tax-related crimes had been prevented with the upgraded digitalisation of 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.