Government owes SARS R6 billion

Over four hundred government departments and state-owned enterprises (SOEs) owe the South African Revenue Service (SARS) R6 billion. 

This was revealed by Finance Minister Enoch Godongwana in a written reply to a parliamentary question this week. 

Godongwana said SARS had noted increasing debt levels owed by government departments and SOEs. 

South Africa has 5,303 government entities, of which most paid their debts on time. However, 404 entities owe SARS R5.9 billion for the 2023/24 financial year. 

The debt comprises R2.4 billion in pay-as-you-earn and R3.5 billion in value-added tax (VAT) payments. 

“Of the R5.9 billion debt, R1 billion is under dispute, leaving a balance of R4.9 billion undisputed, of which R2.9 billion is older than three years,” Godongwana said.

“This will be monitored closely in the coming months to observe trends post the implementation of the cost containment measures.”

According to the Minister, there is no correlation between the current cost containment measures and the increased inability of departments and SOEs to pay their taxes. 

“This will be monitored closely in the coming months to observe trends post the implementation of the cost containment measures,” Godongwana said. 

SARS is engaging with the National Treasury about deducting the amounts owed from the grants given to departments and SOEs from the Treasury. 

“It is genuinely concerning for state organs not to comply with the very tax laws that generate revenue that enables them to exist to deliver on their respective mandates of rendering public service to citizens who are the taxpaying community.” 

The revelation that government entities are not paying their tax bills comes when the government is struggling to collect sufficient revenue to finance its spending obligations. 

In the current year, commodity prices have fallen faster than expected, and VAT refund claims have risen, resulting in revenue collections projected to be R56.8 billion below 2023 Budget estimates. 

Godongwana said South Africa’s deep and longstanding fiscal challenges are rooted in a long‐term pattern of low economic growth. 

Government spending has exceeded revenue since the 2008 global financial crisis, resulting in persistent large budget deficits. 

“Moderate budget deficits are not cause for concern. The difficulty arises when deficits are too large for too long, requiring ever‐higher borrowing levels that are unmatched by improvements in public services,” he said. 

“This is the problem facing South Africa, and it is reflected in debt‐service costs that consume an ever‐larger share of public resources and shrinking fiscal space to respond to shocks.”