While SARS has had to deal with “bogus” companies trying to claim VAT refunds, Commissioner Edward Kieswetter said efforts to improve tax compliance helped raise R75 billion.
The Commissioner was on Wednesday speaking at a briefing on the preliminary results for revenue collections for the 2019/20 tax year.
The revenue service managed to grow revenue collection by 5.3% to R1.356 trillion. This was still short of the 2019 National Budget’s estimate of R1.422 trillion.
Through focusing on improving revenue compliance, some R60 billion has been contributed to total revenue collected, and a revenue recovery programme has raised a further R15 billion – this is collectively R75 billion, Kieswetter said.
Kieswetter said SARS initially estimated that losses to the fiscus due to non-compliance were in excess of R100 billion. This can be attributed to general non-compliance; when taxpayers either consciously or unconsciously under-disclose, or incorrectly disclose their provisional payments. Alternatively, this can include general tax evasion, through base erosion and profit shifting, and thirdly, by criminal activities such as VAT fraud.
Kieswetter said that there had been a “significant development” in fraudulent claims for VAT. Fictitious companies had essentially been created, essentially “stealing money from the fiscus”.
“In terms of criminal and illicit activities we see in terms of VAT fraud, we see companies being created purely to get access to the VAT system,” said Kieswetter. These companies had fraudulently claimed VAT refunds. In the last three years, SARS has suffered “compromised revenue” between R8 billion and R10 billion. “Just this year we were able to stem R600 million in VAT outflows by companies we had assessed to be bogus companies that accessed VAT,” he said.
Kieswetter said SARS was also stepping up work on data management and artificial intelligence to help predict and develop better insights on taxpayer behaviour that results in fraudulent disclosures in claims from the national revenue fund, due to the fiscus.
Over the past year, SARS picked up a decline in compliance in the way companies and individuals estimated their provisional taxes. “In certain areas, these are clearly manipulated,” he said. “We have a significant decline in Pay As You Earn compliance levels,” he added.
Kieswetter said SARS was also concerned with tax avoidance, evidenced by the extent of abuse in transfer pricing, and base erosion and profit shifting measures. “In the last few years, since 2017, more than R200 billion has left South Africa as charges paid by local subsidiaries to offshore parent companies in the form of commissions – interest payments.”
Kieswetter said these charges would be ordinarily due, but they had been overstated. In 2017 alone, R93 billion left South Africa in transfer charges, of which a third or R31 billion consisted of interest payments against loans.
Kieswetter said SARS was focusing on base erosion and profit shifting – and working along with the Davis Tax Committee to tackle it.