The South African Revenue Service (Sars) says it collected R1.356 trillion in the financial year ending on 31 March 2020. This is about R66 billion less than expected.

Sars Commissioner, Edward Kieswetter, says they have noted a contraction of 0.1 % in company taxes. He has blamed the country’s declining economic growth and the high unemployment rates for the decrease in revenue collection targets.

Sars says it collected a gross amount of R1.647 trillion, but this was offset by refunds of almost R300 billion.

Sars announced its 2019/2020 preliminary results for revenue collection this week.

Measured against the 2019 budget estimate of R1.422 trillion, the net collection indicates that Sars collected a figure less expected.

“The actual economic performance largely driven by decline in growth from 8.9 to 5.5 % has resulted in a downward revenue impact of R63 billion for the financial year ending 2020, and this does not include the full assessments of revenue losses due to compliance. So, these downwards adjustments we have to make up in other ways.”

Impact of State Capture on revenue collection

The Sars Commissioner says the damage from State Capture has continued to weaken the organisation. He says this has contributed to a significant loss of public confidence and honest taxpayers feel justified in withholding their taxes.

Sars says it has also collected R75 billion from voluntary compliance but continues to lose tax revenue through criminal and fraudulent activities.

“Criminals become emboldened to engage the tax system purely for the purposes of fraud and syndicated criminal activities. Our initial assessment is that tax revenue in this regard is well over R100 billion in our case in South Africa. Sars is working flat out with the Davies Tax committee to quantify this and we will report this around the middle of this year.”

Increase in VAT collection

Kieswetter says they saw an increase in Value Added Tax (VAT) collections and personal income taxes.

“Personal Income Taxes’ we collected R529.9 billion which represents 39% of our total revenue and growth of 7% to the prior year. VAT is R346. 2 billion which is 6.7% of the total. Property taxes make up R16 billion or 1.2 % of our total. Dividend taxes makes 48.3% or 2.1% of our total revenues.”

SABC News reports that Sars has paid out more than R2 billion in tax returns since the beginning of the lockdown: 

Coronavirus could cause a contraction

The commissioner has warned that revenue collection estimates for 2020 might contract as a result of the impact of COVID-19 on the economy. But this will be announced by the Minister of Finance in October.

“As we are experiencing coronavirus epidemic right now, all the assumptions, all of the models that we may have done in the previous six months in many respects, are now fine-tuning uncertainty. Where COVID-19 will lead us to we have to be agile; we have to be responsive and we will collaborate and work under the guidance of Treasury should there be any need for that. For now, the revenue targets stand and we work through that.”