South Africa's tax authority, the South African Revenue Service (Sars), is taking a firm stance on tax collection, aiming to recover a staggering R44 billion in undisputed debt from taxpayers with government contracts. This aggressive approach, as outlined by newly appointed commissioner Johnstone Makhubu, is a clear message that non-compliance will no longer be tolerated.
Makhubu's strategy involves a multi-pronged attack. Firstly, Sars is collaborating with provincial treasuries and the National Treasury to ensure that tax administration is alerted before payments are made to entities with outstanding tax debts. This proactive measure aims to intercept funds before they leave the company's accounts, potentially preventing employees from being underpaid due to their employers' tax non-compliance.
Secondly, a new strategy targets directors who have been frequently involved in multiple companies with tax debts. Makhubu proposes declaring these directors delinquent under the Companies Act, suggesting that they should not be allowed to run companies or act as directors in the future. This move sends a strong message that personal responsibility for tax compliance will be enforced.
The commissioner's stance on President Cyril Ramaphosa's tax affairs regarding his Phala Phala game farm is also noteworthy. Makhubu has reviewed the documents and stands by Sars' decisions, maintaining the autonomy and independence of the tax authority. This response to MK party MP Des van Rooyen's inquiry highlights the commitment to transparency and accountability.
However, the economic landscape presents significant challenges. The 2026/27 revenue target of R2.13 trillion is under threat due to the US-Israel war with Iran, disrupted supply chains, higher inflation, and rising interest rates. These factors will likely result in lower disposable income, reduced spending, and decreased VAT revenue. The tax gap, estimated at R350-450 billion, further exacerbates the situation, requiring additional funding to close the gap.
Makhubu acknowledges the underfunding of Sars, noting a R43.6 billion shortfall between the budget requested and the amount allocated by the government since 2017/18. The organisation needs an additional 2,380 full-time employees and requires R7.5-10 billion over the next seven to ten years for modernisation. Despite these challenges, Sars is committed to building a solid and stable tax authority, ensuring that the basics are in place and that the modernisation project is accelerated.
In conclusion, Sars' aggressive tax collection strategy, coupled with a focus on personal responsibility and transparency, sends a powerful message. However, the economic challenges and underfunding require careful management and continued support from the government to ensure the long-term success of the tax authority.
