South Africa To Launch Inquiry Into Tax Revenue Shortfall

by Lorys Charalambous, Tax-News.com, Cyprus

08 November 2017

South Africa is to launch an inquiry into the reasons behind a shortfall in tax revenue collections.

A commission will be established in the near term to examine the under-collection of taxes due, and the South African Revenue Service (SARS) has pledged to cooperate fully with this.

Finance Minister Malusi Gigaba explained that: "We expect this inquiry to be constructive and to strengthen the institution further where possible. It is critical for Government to determine the cause of the tax revenue under-collection in order to enable Government to take urgent remedial steps to ensure that SARS is able to meet its revenue targets as set out in the Medium Term Budget Policy Statement (MTBPS) and Budget."

Although in the recent past South Africa has been very successful in expanding its taxpayer base, going from just 1.7m registered taxpayers in 1994 to 16.8m in 2014, revenue growth has started to tail off in recent years. With revenues failing to keep up with spending, the inevitable result has been a widening budget deficit, which the Government has found difficult to contain.

The inquiry will help to assess what factors are responsible for the under-collection of revenue by SARS, and what steps need to be taken to improve performance management systems at SARS to improve its capacity to collect revenue.

Gigaba said: "Whatever the reason for such shortfall, the risk of under-collection of revenue impacts directly on the size of the future budget deficits, and hence on the sustainability of the projected debt-to-GDP trend, and directly on our credit rating and growth prospects."

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