#MTBPS2018: SARS withheld tax refunds under former Commissioner Moyane, these are the consequences…

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The Medium Term Budget Policy Statement (MTBPS) has confirmed that the South African Revenue Service (SARS) under its former Commissioner Tom Moyane delayed paying tax refunds, which is now hurting revenue.

According to its current Commissioner Mark Kingon, whether this was intentional or not is up for debate but he believes it was not intentional.

Kingon in a closed media briefing said SARS is currently evaluating why refund payments slowed.

The MTBPS points a negative picture of what happened to tax revenues under Moyane’s tenure and the aftermath: “A backlog of VAT refunds at SARS, and an underestimation of refunds due, has led to an overly optimistic view of revenue growth. Net VAT collections account for about R20 billion of the in-year revenue shortfall. Two factors account for the revision in net VAT. The VAT refund estimate has been revised upwards by R9 billion, and about R11 billion will be paid out to clear the backlog in the VAT credit book (see table).

“The remaining R7.4 billion of the shortfall in the current year mostly reflects slower corporate income tax collections due to weak growth in wholesale and retail trade, manufacturing and transport. Personal income tax continues to be negatively affected by job losses, moderate wage settlements, lower bonus payments and a slower expansion of publicsector employment”.

The MTBPS also states: “In 2017/18, for the first time since the 2008 global financial crisis, tax revenue growth did not exceed GDP growth. Revenue shortfalls have widened over the past four years, with under-collections rising from R7.4 billion in 2014/15 to R49 billion in 2017/18. These shortfalls would have been larger were it not for increases in personal income, dividend withholding, capital gains and other taxes. Revenue collections in 2017/18 were R0.8 billion lower than estimated in the 2018 Budget. Revenue collection for the first six months of 2018/19 grew by 10.7 per cent compared with the same period last year. However, the technical recession experienced in the first half of the year has begun to feed through to revenue collection, which has slowed. Weaker economic growth, alongside a once-off payment of overdue VAT refunds, will result in an in-year revenue shortfall now estimated at R27.4 billion, relative to the 2018 Budget estimate.”

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