VAT, PAYE collection to be bolstered to improve revenue

Improved tax collection and administration continue to be an important element in achieving fiscal consolidation, the National Treasury said on Wednesday.

It said despite several years of mismanagement, the South African Revenue Service continues to rebuild its capacity.

The service’s near-term objectives include finalizing the tax gap study in December 2020 to quantify the difference between how much tax should be collected and how much is collected; remaining focused on international taxes – particularly aggressive tax planning using transfer pricing; increasing enforcement to eliminate syndicated fraud and tax crimes and continuing to use third-party data to find non-compliant taxpayers.

In additon, SARS will focus on collecting pay-as-you-earn and VAT debt, and ensuring that outstanding taxpayer returns are filed and liabilities paid.

Tax revenue to increase to R1.5 trillion

The National Treasury said, meanwhile, it expects tax revenue to increase by 25.2 % of GDP over a three-year period.

“Tax revenue is expected to increase to R1.5 trillion, or 25.2 % of GDP, by the end of the MTEF period. The extraordinary shock to economic output in 2020/21 translates into large revenue shortfalls that will persist over the medium term.

“The shortfalls are exacerbated by a reduction in the tax-to-GDP ratio because the tax system automatically adjusts to reduce the amount of revenue that is collected for a given level of economic activity in the event of a crisis.”

In April 2020, the government introduced tax relief measures to provide temporary assistance to businesses and households during the lockdown.

These interventions offered a combination of cash-flow relief through tax deferrals, and direct support through increased incentives to retain lower-income employees and reductions in payroll taxes.

Details on the take-up and effects of these measures will be provided in the 2021 Budget Review.

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