SARS shortfall to blame for VAT hike

Treasury would not have needed to increase value added tax by one percentage point to 15% in April if not for the revenue shortfall at the South African Revenue Services (SARS).

31 August 2018 | Economics

SARS has become more and more opaque- Ismail Momoniat, deputy director general , SA Treasury

The deputy director general at National Treasury Ismail Momoniat revealed this to the Nugent Commission of Inquiry on Wednesday.

According to Momoniat, Treasury hopes to raise R25 billion from the VAT rate hike in the 2018/2019 financial year - if no further zero-rated items are added to the basket of goods that are exempt from VAT.

Momoniat, who is the head of tax and financial sector policy at Treasury, testified alongside other Treasury officials at the commission probing administration and governance at the tax agency.

He spoke frankly about his frustration with SARS leadership under now suspended commissioner Tom Moyane, saying they were "destroying SARS".

"You need to be cleaner than clean. If you’re not, [this] will impact on tax morality, and that has huge impact for the country," he said.

He also claimed that there didn’t seem to be political will within the revenue agency to prevent illicit financial flows.

Momoniat questioned why external legal teams were brought in to undertake investigations at SARS, such as law firm Hogan Lovells, how procurement processes were followed and why the tax agency's internal legal unit wasn’t used.

"SARS has become more and more opaque," he said.

SARS commissioner too powerful

Judge Robert Nugent asked Momoniat to go through his submission on proposed amendments to the way SARS functions.

Momoniat said he was part of the team that worked on drafting the Public Finance Management Act (PFMA) in 1994, and this legislation, which governs public institutions, was based on the euphoria of the period and the assumption that corruption would never be tolerated.

"If we had to do the PFMA again, [it] would have stronger measures if things fall apart," Momoniat said.

"The [SARS] commissioner is too powerful. The structure, the bonuses rest with the commissioner. Even when the AG (Auditor General) found the bonus payments were irregular,” he said.

However, Nugent said that power couldn't be divided - it had to rest somewhere ultimately, and the commission was looking to ensure necessary checks and balances were in place.

Momoniat suggested a model like that used at South African Reserve Bank, where there is an independent board which the governor chairs.

Nugent asked Momoniat to develop his suggestions further and submit a memorandum to the commission.

The Davis Tax Commission previously recommended that the SARS commissioner be appointed through a parliamentary process, instead of by the president.

Unexplained drops in shortfall

Chris Axelson, a director at Treasury for personal income and taxes, took the commission through a series of slides showing the reasons behind the R48.2 billion collection shortfall in 2017/2018.

Moyane, despite criticism from former Finance Minister Pravin Gordhan, claimed that SARS was unable to meet its revenue targets due to weak economic growth affecting revenue.

Axelson said the "huge decrease in import taxes" and other revenue streams could "largely be explained by the economy".

But he said there were very small changes to the wage bill in 2017/2018, while there was still a large shortfall in personal income tax collections.

According to Axelson, the underlying data didn't support Moyane's claim that it was sluggish economic growth alone that contributed to the revenue shortfall as there were "unexplained drops". He said they were unable to pinpoint the reasons for the tax collection gap.

Treasury’s director-general Dondo Mogajane concluded Treasury’s submission by telling the inquiry a well-functioning tax agency was good for democracy.

"If SARS is not collecting, the country [still] has to run; the country will have to borrow more," Mogajane said.

The inquiry continues on Thursday, with testimony from international consultancy firm Bain & Company about their role in the SARS 2015 restructuring process, which was blamed by several witnesses last week for the drop in compliance and collections.

-Fin24

Similar News

 

Households drive credit uptake in June

1 day - 04 August 2021 | Economics

PHILLEPUS UUSIKURisk appetite among borrowers remains subdued, with credit extended to the private sector moderating to 2.7% year-on-year in June 2021 from 2.8% year-on-year in...

Du Toit acting as CEO of Agribank

1 day - 04 August 2021 | Economics

STAFF REPORTERThe Agricultural Bank of Namibia (Agribank) has announced the appointment of Louis Du Toit as the acting Chief Executive Officer (CEO). Du Toit replaces...

Bank of Namibia to conduct a BoP census

1 day - 04 August 2021 | Economics

STAFF REPORTERThe Bank of Namibia (BoN) intends on conducting a Balance of Payments (BoP) census in order to increase Namibia's BoP sample size and statistics....

Fuel price monster gentle with consumers

1 day - 04 August 2021 | Economics

PHILLEPUS UUSIKUThe Ministry of Mines and Energy has announced that both petrol and diesel prices will remain unchanged countrywide for month of August 2021.For Walvis...

SA's factory activity tumbles

1 day - 04 August 2021 | Economics

South African manufacturing activity shrank at its fastest rate in 14 months in July, weighed down by tighter coronavirus lockdown restrictions and civil unrest in...

Rail cargo transportation slipped into a decline

2 days ago - 03 August 2021 | Economics

PHILLEPUS UUSIKU During June 2021, Namibia transported 975 708 tonnes of cargo through rail, road, air and sea, compared to 810 940 tonnes and 779...

Electricity production capacity needs to improve

3 days ago - 02 August 2021 | Economics

PHILLEPUS UUSIKU For the month of June 2021, Namibia mainly imported its electricity from Eskom Aggeneis, Zesco-Firm Zambia and ZPC-Zimbabwe due to a decline in...

Nigeria's central bank ends dollar sales

3 days ago - 02 August 2021 | Economics

CHIJIOKE OHUOCHA AND LIBBY GEORGENigeria's central bank is halting dollar sales to exchange bureaus, saying they have become channels for graft and illicit flows of...

KwaZulu-Natal sets state of disaster

3 days ago - 02 August 2021 | Economics

The government of the province worst-hit by recent deadly unrest in South Africa on Thursday declared a state of disaster to divert funds towards recovery.Riots...

GIPF accepting funeral claims electronically

3 days ago - 02 August 2021 | Economics

The Government Institutions Pension Fund (GIPF) is delighted to inform their members and stakeholders that the Fund has amended the funeral claim submission procedure. GIPF...

Latest News

Vaccinated northern chiefs urge subjects...

2 hours ago | Health

TUYEIMO HAIDULA OSHAKATI Communities often look to traditional and religious leaders for advice on how to live. In northern Namibia, these...

EDITORIAL: Happy 80th birthday, Mr...

2 hours ago | Opinion

Today we pause to wish, though belatedly, President Hage Geingob a revolutionary and happy birthday.On the day he turned 80, the usual pomp and fanfare...

DRC fire victims get new...

2 hours ago | Accidents

Adolf Kaure SWAKOPMUNDHome affairs minister Albert Kawana recently handed over 33 identity documents (IDs)...

Suspected stock thieves on the...

2 hours ago | Crime

OTIS DANIELS SWAKOPMUNDPolice confirmed an incident of stock theft that took place at farm Waldheim between last Thursday and Sunday in the...

Delgado-Lühl citizenship judgement postponed

2 hours ago | Justice

JANA-MARI SMITH WINDHOEK The much anticipated judgement in a citizenship case of...

Food security assessed this month

2 hours ago | Agriculture

ELLANIE SMITWINDHOEKThe latest assessment to determine the status of livelihood and food insecurity countrywide is scheduled to take place this month.Anna Dumeni of the Office...

The basic form and structure...

2 hours ago | Agriculture

STAFF REPORTERWINDHOEKIt is important to know the basic form and structure of plants to understand how plants grow and produce seeds and fruits.The technical advisor...

Rangeland management for better grazing

2 hours ago | Agriculture

KIRSTY WATERMEYEROKAHANDJAA Namibian farmer is proving the benefits of holistically managing farmland for better cattle farming results.“The more grass you have, the more cattle you...

Global community must unite against...

2 hours ago | Opinion

NALEDIA PANDOROn 18 July the world marked 103 years since the birth of our late beloved global icon and first president of our democratic republic,...

Load More