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SARS Issues Three-Year Strategic Plan

by Lorys Charalambous,, Cyprus

03 June 2011

Oupa Magashula, Commissioner of the South African Revenue Service (SARS), has presented its Strategic Plan for the fiscal years from 2011-12 to 2013-14, expressing his confidence that the Plan provides the blueprint for the continuous compliance growth and sustained revenue realisation, which will be necessary to support economic development in the country.

He said that SARS not only has a role to pay in providing the funds to other areas of government, but also to cut red tape and other barriers to entrepreneurship and economic growth through initiatives such as single registration and more efficient administration, especially for small businesses.

Magashula pointed out that SARS has shown a 10% year-on-year growth of revenue collected over the past 14 years – a record spoiled only by the economic downturn during 2009/10. In parliament, Finance Minister Pravin Gordhan disclosed that SARS has a tax revenue collection target of ZAR741bn (USD108.6bn) for 2011/12, compared to the ZAR674bn it collected in the previous year.

Gordhan confirmed that the estimated revenue collection targets for SARS will rise between 10.3% and 12.2% per year until 2013-14, when SARS will be required to deliver just under ZAR1 trillion in tax revenue. It will therefore be expected to collect well over ZAR2 trillion over the next three fiscal years.

The Plan says that the cornerstone of all SARS plans must be to improve the levels of compliance to tax and customs legislation. Magashula disclosed that this also “means clamping down on crime and corruption, including the illicit economy and counterfeit and smuggled goods which undermine local competitiveness and opportunities”.

To this end, SARS has “embarked on a sustained programme to improve its services, educate the public on their obligations and to detect and deter non-compliance in line with its compliance model.”

It is emphasized that, under the current negative economic climate, sustaining taxpayer compliance levels may be difficult. SARS foresees that it will need to strengthen its capacity to detect and pursue those who seek to avoid tax obligations “through re-enforcing double taxation agreements and tax information exchange agreements between tax authorities and financial centres, as well as collaborating with other government departments and agencies in the revenue collection and trade value chains.”

In addition, the government has a 14-year implementation period to phase in a National Health Insurance (NHI) system, which will require funding over and above current revenues allocated to public health. A range of possible options will need to be considered to fund the NHI, including “a combination of a payroll tax increases (payable by employers), an increase in the value added tax rate and an additional surcharge on the taxable income of individuals.”

SARS will also need to react to the introduction of new policy instruments, including the proposed youth wage subsidy, the NHI, the new carbon tax and a broadening of the social security net and retirement industry reform. Furthermore, it is disclosed that “some members of Cabinet have suggested that SARS be required to collect other forms of revenue (e.g. municipal rates and taxes)”.

TAGS: individuals | South Africa | compliance | tax | small business | business | tax information exchange agreement (TIEA) | double tax agreement (DTA) | tax compliance | law | payroll | agreements | health care | carbon tax | social security | Africa

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