SARS Obtains Record Tax Revenues

by Lorys Charalambous, Tax-News.com, Cyprus

21 October 2011

While presenting the South African Revenue Service (SARS) 2010/11 Annual Report to a parliamentary committee, its Commissioner Oupa Magashula announced a record tax haul during the year, which also exceeded its target.

SARS collected a total of ZAR674.2bn (USD83.5bn) in tax revenue in the last financial year to end-February 2011, up by ZAR76bn, or 13%, over the previous fiscal year and exceeding its collection target for the year by some ZAR2bn. South African tax revenue has now increased at an annual average of 11.8% since the 1994/95 fiscal year.

Magashula said six of the country's seven tax categories increased during the year, with the main contributors being personal income tax and value added tax (VAT), which collectively rose by ZAR57.2bn. Only corporate income tax showed a slight decrease in collections.

In addition, SARS had managed to assess 2.7m returns within 24 hours, up 18% from the previous tax year, while 81% of taxpayers had filed their taxes on time and 79% of refunds were paid out within 48 hours.

Magashula added that the cost of collecting tax had remained at between 1% and 1.2% for every ZAR1 collected over the past six years, which, he pointed out, “made SARS one of most cost-effective revenue administrations in the world”.

The number of registered users on e-Filing had increased 12 fold - from 500,000 at the end of 2006 to just over 6m users by end-March 2011. The dramatic growth in electronic filing, he said, resulted in just 4.2% of tax returns (186,000) being submitted on paper in the 2010/11 tax season - down from 8% in the previous year.

Magashula pointed out that further improvements are continuing in VAT modernization. Over 88% of VAT declarations were paid out within 48 hours, reducing the VAT credits held by SARS from ZAR27.8bn at the start of the fiscal year to ZAR22bn currently.

In the 2010/11 tax season, SARS collected ZAR287.2bn in VAT, making it the largest tax administered by it. It is, however, also the tax with the largest scope for abuse and a number of measures have been taken over the past few years to reduce fraud.

These measures have included the introduction at the beginning of this year of an additional verification process when an increase in VAT refunds was not supported by a similar increase in corporate income tax, while VAT vendors selected for further verification of their refund claims are now given the option to either submit documents in support of their declaration or to revise their declaration when an error is suspected.

Magashula also emphasized that SARS continued to play a leading role in a number of international multilateral tax and customs forums, including the African Tax Administration Forum, the Organization for Economic Co-operation and Development and the World Customs Organization.

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