SARS collected R1.28 trillion for the tax year ending 2019, falling R14.6 billion short of its target of R1.3 trillion. However, Ettiene Retief, Chairman of the National Tax and SARS Committee at the South African Institute of Professional Accountants (SAIPA), believes the tax authority should be commended.
 
“SARS’ operations have been hampered by significant handicaps due to past mismanagement, including a massive VAT refund obligation, deep systemic breakdown and flagging employee morale,” says Retief. “Add to that weak economy growth and the steps implemented to rebuild SARS, it is commendable to have fared so well.”
 
Well done, Mark Kingon
According to Retief, that SARS was able to come so close to its expected revenue target can largely be attributed to the excellent work of Mark Kingon, the organisation’s outgoing interim commissioner, and his team. “Mark definitely deserves recognition for his leadership in keeping SARS from operational failure, and staring to rebuild trust in the organisation,” he says.
 
Revenue realised under Kingon has grown by 5.8% compared to the previous financial year. Also, much of the work done in the background will continue to bear fruit long after this year’s final audits are completed. Retief points to initiatives like relaunching the Large Business Centre (LBC) which, even though it delivered notable value, was terminated under disgraced former SARS commissioner, Tom Moyane. Kingon has also implemented processes for combating illicit tax activities and correcting internal issues. “These progressive steps may result in windfalls that have yet to be realised,” Retief observes. “Overall, we can expect that Kingon’s efforts will provide a strong platform for the incoming commissioner to work from.”
 
Good job, President Ramaphosa
Retief also applauds the transparent selection process used to vet potential candidates and nominate the new SARS commissioner. Unlike previous president, who at times appointed a commissioner based on personal or political preference, President Ramaphosa opted for an approach that was both open and objective, effectively placing himself at arm’s length from the proceedings, as was recommended by the Commission of Inquiry.
 
A high-level panel, led by Trevor Manuel, was appointed by Finance Minister Tito Mboweni, to identify capable applicants and make their selection from a list of candidates that included Mark Kingon himself. Their final choice was Edward Kieswetter, who will take up the role of Commissioner of SARS from 1st May.
 
Welcome, Edward Kieswetter
“There’s no doubt Kieswetter is up to the task,” says Retief. “Apart from having been part of SARS’ history, he has a strong pedigree when it comes to running organisations, including heading up Alexander Forbes.”
 
No doubt, the new commissioner will have his hands full as he builds on the good work started by Kingon. However, Kieswetter’s first and foremost task will be to re-engage SARS staff, whose attitude and competence plays a pivotal role in winning back public trust and rebuilding tax morality. He’ll need to provide strong leadership, assure them of their value and motivate them to value service excellence. Secondly, he’ll have to focus on rebuilding SARS systems and capacity. . “He has a long road ahead of him but he’s the right man for the job,” says Retief.
 
ENDS

MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
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Authored by: Ettiene Retief, Chairman of the National Tax and SARS Committee at the South African Institute of Professional Accountants  
 
The decision by the South African Revenue Service (SARS) to re-establish its Large Business Centre (LBC) will undoubtedly ease the administrative and compliance burden of big business and high net-worth individuals.
 
It will also enhance tax collections that have fallen sharply since the centre was dismantled in 2015 following major restructuring under the reign of suspended commissioner Tom Moyane.
 
Under the restructured business model, currently the focus of the Nugent commission of inquiry into governance and administration at the tax agency, the LBC was systematically dismantled to “eliminate duplication and improve efficiencies”, SARS said at the time.
 
The impact of the dismantled LBC
The tax affairs of large corporates and high net-worth individuals are highly complex. Their risk profiles differ vastly from ordinary taxpayers. The potential loss to the fiscus is substantial if they are not managed properly.
 
Before the LBC was dismantled it was responsible for the collection of more than 30% of total tax collections. This included individual income tax, corporate income tax, Value Added Tax, employee taxes, dividends tax, donations tax and royalties tax.
 
The dismantling of the centre led to a decline in the ability of SARS to collect what was due to the fiscus. Concerns were also raised about a decline in compliance. The “one-stop-shop” for large businesses was gone, leaving multi-million-rand enterprises in the same position as ordinary taxpayers.
 
This had a major impact on the way they had to deal with complex issues, the manner and time in which queries was solved, audits conducted, and disputes resolved.
 
Compliance, collections and enforcement  
When the LBC was established in 2004 the aim was to encourage compliance, to ensure responsible enforcement and to offer specialised and sector specific expertise to large businesses.
 
Sector specific expertise was developed in the most crucial sectors in the economy, including financial services, construction, mining and agriculture. The scope of the LBC covered listed and unlisted companies, parastatals and high net worth individuals. Expertise in highly complex tax legislation, notably transfer pricing, was developed to ensure that revenue is taxed where it is generated.
 
The expertise in the LBC was not only in terms of the interpretation and implementation of tax legislation, but also included expert knowledge of the businesses in the different economic sectors.
 
This assisted hugely with greater administrative knowledge, better risk-profiling in terms of audits, and better audit and dispute outcomes.  The LBC ensured that there was one dedicated relationship manager which dealt with clients within specific sectors. This meant that a company raising a specific issue or query with SARS were dealing with the same individuals, who not only understood the essence of the issue, but was able to give feedback to how the matter was being dealt with.
 
The dismantling led to much of the expertise being lost to SARS. An exodus of expertise followed the restructuring process, which was done by the consultancy firm Bain at a cost of more than R160m.
 
Pivotal role of the LBC
The announcement by Acting commissioner Mark Kingon to re-instate the LBC, as well as the Illicit Economy Team, must be welcomed. The acting commissioner said in his statement, announcing the move, that it was based on the “pivotal role” these units play in its service to large corporate taxpayers, and in fighting illicit trade in the country.
 
SAIPA supports the move to re-establish the LBC.
 
There is a deep understanding of the time and effort it will take to rebuild the capacity that existed before the dismantling of the units. However, this will certain increase better administrative outcomes, faster turnaround times and better compliance, audit results and dispute resolution.
 
Although SARS has not put a timeline on when the units will be reinstituted, the fact that dedicated teams have already started the process, is encouraging.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants