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SARS Achieves Historic Tax Revenue Milestone

  • Revenue Achievement: Despite economic challenges, South Africa's tax revenue reached a significant milestone of R2.155 trillion for the 2023/24 fiscal year, showcasing a 4.2% year-on-year growth.
  • Refunds and Compliance: SARS refunded taxpayers with R414 billion, the highest ever, with a portion directed to support small businesses and individuals. Despite this, concerns remain about potential fraud and abuse in the refund system. SARS also emphasized efforts to enhance compliance, with a notable increase in voluntary compliance index.
  • Tax Product Performance: Personal income taxes and domestic VAT demonstrated substantial growth, while corporate income tax contracted. SARS's compliance program significantly contributed to revenue, reflecting the agency's commitment to enforcing tax obligations.
Tax Revenue Milestone

South Africa’s economic landscape remains challenged by issues such as load shedding and disruptions in port and logistics operations. However, amidst these challenges, the South African Revenue Service (SARS) has reported a significant achievement in tax collection, marking a gross tax revenue of R2.155 trillion for the 2023/24 financial year.

During a media briefing addressing the preliminary revenue outcome for the fiscal year, SARS Commissioner Edward Kieswetter highlighted that this revenue figure aligned with the revised estimate, reflecting a year-on-year growth of 4.2%, relative to a nominal gross domestic product (GDP) growth rate of 4.9%.

Kieswetter further elaborated, stating, “Net revenue, which represents the revenue after refunds have been disbursed to taxpayers, stands at R1.741 trillion. This exceeds the revised estimate set by the Minister of Finance by approximately R10 billion, indicating a 3.2% year-on-year growth, or R54.2 billion more than the previous year.”

He emphasized that this revenue performance translates to a tax-to-GDP ratio of 24.7% and a provisional tax buoyancy ratio of 0.9% at the gross level and 0.7% at net revenues.

In terms of refunds, SARS disbursed R414 billion to taxpayers, marking a 6% year-on-year growth and the highest quantum of refunds in SARS history, increasing by R33 billion from the prior year. Notably, VAT refunds amounted to R343 billion, representing a 7.5% growth compared to the previous year.

Kieswetter highlighted the significance of these refunds, stating, “These refunds, amounting to approximately 6% of GDP, play a crucial role, particularly during times when businesses and individuals face financial constraints. Of this total, R120 billion was directed to Small, Medium, and Micro Enterprises (SMMEs), and R37 billion to individuals.”

While acknowledging the positive impact of refunds on the economy, Kieswetter expressed concern regarding potential fraud and abuse of the refund system. He stated, “I remain concerned about fraud and abuse of our refund system. In the period under review, SARS was able to prevent the outflow of R101 billion of impermissible or fraudulent refunds and secure a number of successful prosecutions.”

Turning to trade facilitation, SARS Customs facilitated a total of R8.5 million trade transactions amounting to R3.96 trillion during the reviewed period. Exports totaled just over R2 trillion, while imports amounted to R1.937 trillion, resulting in a trade balance surplus of R11 billion.

Kieswetter provided insight into SARS’s compliance environment, noting, “We have increased our voluntary compliance index from 61.6% to 63.9%. This index, developed in 2020, measures the overall compliance behavior of taxpayers across the compliance value chain, including registration, filing declaration, and payment.”

In terms of revenue by tax products, Kieswetter outlined the increases in various tax categories compared to the previous fiscal year. Total tax revenue increased by R54.2 billion (3.2%), with personal income taxes and domestic VAT showing notable growth rates.

He explained, “Net Personal Income Tax, accounting for 37.3% of total revenue, grew by R49.5 billion (8.2%) in 2023/24, driven by improvements in employment and wage settlement rates. Net Corporate Income Tax (CIT), however, contracted by R31 billion (-8.9%) during the same period.”

Highlighting SARS’s determination to enforce compliance, Kieswetter stated, “The SARS compliance program contributed R293.7 billion as of the end of March, representing an increase of R61.9 billion (26.7%) from the previous year.”

Reflecting on SARS’s overall contribution to the South African economy, Kieswetter emphasized the significance of the revenue collected over the past 30 years. He stated, “Since its inception, SARS has collected R21.6 trillion in net tax revenues, with a compound annual growth rate of 9.9%. These funds have been instrumental in supporting the South African democracy and providing essential services to millions of citizens.”

Kieswetter credited SARS’s achievements to effective partnerships established with compliant stakeholders in the tax and Customs ecosystems. He emphasized the importance of leveraging data science, technology, and artificial intelligence to streamline the tax obligation fulfillment process.

In conclusion, Kieswetter reiterated SARS’s commitment to contributing to nation-building and sustaining democracy through its revenue collection efforts. He emphasized the ongoing investment in technology and partnerships to enhance efficiency and compliance within the tax system.

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