Nine areas SARS is targeting in 2024

SARS has outlined the sectors it is focusing on for 2024, including the illicit economy, multinational corporations, cryptocurrency, and eCommerce transactions. 

SARS Commissioner Edward Kieswetter revealed this in the service’s presentation of revenue collections for the 2023 financial year. 

South Africa’s preliminary tax collection beat estimates despite significant growth in refunds, logistics constraints, record power outages and a faded commodity boom.

SARS collected R1.74 trillion in the fiscal year through March 31, which was about R10 billion more than projected in the February budget, representing a 3.2% increase from the 2023 fiscal year.

The higher-than-anticipated income means the budget deficit as a percentage of gross domestic product for the past fiscal year could be better than the National Treasury’s February projection of 4.9%.

However, the revenue service is not resting on its laurels and has laid out its focus areas for the 2024/25 financial year.

• Illicit economy, including a focus on illicit tobacco, illicit fuel, illicit financial flows
• International taxes with a focus on base erosion and profit shifting 
• Trade mispricing and undervaluation fraud
• Debt cash collections
• Syndicated VAT fraud and tax crimes
• Tax base broadening through the use of 3rd party data
• eCommerce transactions, including duties on imported goods
• High Wealth Individuals (service and compliance) 
• Cryptocurrency

SARS will be particularly focused on the illicit economy and the illicit cigarette trade, as it has lost billions in tax revenue from this sector.

A new study by the University of Cape Town (UCT) revealed that the government lost R119 billion in excise and VAT revenue between 2002 and 2022 because of the illicit cigarette market.

Nicole Vellios and Corne van Walbeek from the research unit on the economics of excisable products at UCT’s School of Economics conducted the study.

The researchers found that the government has been losing significant revenue by not receiving excise duties and VAT from all cigarettes consumed in South Africa.

“This trend is likely to continue if the government does not secure the supply chain from the point of production to the point of sale,” they said.

There has been a huge increase in the illicit cigarette trade in South Africa over the last few years, fuelled by the cigarette ban during the Covid-19 pandemic.

Illicit cigarettes comprised only 5% of the market in 2009. However, following the cigarette ban, it peaked at 60% in 2021 and maintained that level in recent years.

This resulted in the government losing R15 billion in excise revenue and R3 billion in VAT revenue in 2022.

The study found that, from 2002 to 2022, the government lost R119 billion in excise and VAT revenue. Most of the lost revenue occurred from 2010 to 2022.

The University of Cape Town’s study loosely aligns with previous estimates regarding the impact of the illicit cigarette trade in South Africa.

Tax Justice South Africa’s Yusuf Abramjee said as much as 70% to 80% of the cigarettes sold in South Africa are illicit.

He highlighted that the minimum collectable tax on a packet of 26 cigarettes is around R23. However, many smaller shops sell these packs for as little as R10.

Tax Justice SA estimates that more than R20 billion in tax revenue was lost in 2022 due to the illegal tobacco trade. This is slightly higher than the R18 billion UCT estimate.