Edward Kieswetter was surprisingly upbeat about the lack of increased personal taxes announced in last week's budget. Here's why.
Despite being the country’s tax boss, responsible for overseeing the collection of your hard-earned money on behalf of the government, Edward Kieswetter was surprisingly upbeat about the lack of increased personal taxes announced in last week’s budget. Here’s why.
To the average person, a budget speech in which the finance minister announces no major tax increases coupled with personal income tax relief seems like something the commissioner of a country’s tax collection service wouldn’t be so keen to see, but in the case of Edward Kieswetter, the impact of said tax relief is seen as a good thing.
Speaking on the sidelines of the 2020 Nedbank and Old Mutual Budget Speech Competition gala dinner, the commissioner of the South African Revenue Service (Sars) explained why Finance Minister Tito Mboweni’s budget proposals were a good thing for the country.
Kieswetter had so much faith in the speech, in fact, that he made a little-known contribution to one of it’s earlier paragraphs. Corinthians 9:24.
“To quote First Corinthians chapter 9 verse 24: ‘Do you not know that those who run in a race all run, but only one receives the prize? Run in such a way that you may win’,” said Mboweni at Kieswetter’s suggestion.
“I gave the verses in the MTBS so I have become the official provider of the scriptural passage,” joked Kieswetter before adding that the minister agreed it was a good scripture reading.
The commissioner, who has served as a protestant lay minister in the new apostolic church for years, explained that upon reading the minister’s speech prior to its delivery, it became very clear that his speech was about winning.
“I drew his attention to the fact that when you enter a race, as Paul reminds us, not everyone who is in the race wins the race.
“Therefore, we are in a race and we want to win and winning is a conscious choice and I thought that Paul gives us a very clear direction to say; entering the race is not enough. Making the choices that will ensure that you win is what we have to do.”
One of the main ways in which treasury is trying to win in the face of global economic adversity is through ensuring that there is more money circulating in the economy.
According to Kieswetter, treasury collectively feels as though simply taking more money out of the economy by hiking taxes would actually harm the economy.
“This is because money left in the economy has a higher multiplier effect than money left in the hands of the state in the short term. To take money out of the economy in the short term often has an adverse impact on the multiplier effect.”
When asked if this would make Sars’ job easier, the commissioner admitted that more hurdles lay ahead for the state organ.
“Once we have done the work to make taxpayers aware of their obligations and make it easy to fulfil it, there’s a very important thing we have to do as Sars. It’s to create a very credible threat of detection for non-compliance.”
Kieswetter admitted that Sars had not yet been able to do that well. He attributes this to the undermining and weakening of the body through state capture which has dented the public’s confidence in both Sars and the government’s ability to fulfil its duties.
“When the public looks at government and state-owned enterprises and sees the level of corruption and levels of the absence of integrity, they feel morally justified to withhold their taxes.”
This, in his opinion, also emboldens criminals’ non-compliant behaviour in activities such as VAT fraud, customs undervaluation, tax base erosion by corporates, creating of entities with no intention to trade and so forth.
“If we get our job right as Sars, we can broaden the tax base (among corporates), improve compliance levels and add more revenue to the fiscus without adjusting rates.”
This, he explains, would then broaden the scope to provide more relief for taxpayers thus freeing up more money to circulate within the economy.
“This budget announcement has a relief of about R14 billion, mainly for individuals and in the future, hopefully, tax relief for corporates.”
In an effort to turn Sars’ fate around and drive home the importance of compliance, the commissioner has set his sights on doing two main things: putting the right organisational structure into place and introducing a system that creates a credible threat of detection for non-compliance. There has even been talk of employing the use of artificial intelligence if need be.
On the public front, he believes Sars still has a long way to go in regaining public faith and that National Director of Public Prosecutions Shamila Batohi’s decision to withdraw charges against three former senior Sars officials in the Rogue Unit case last month goes a long way in that regard.
“Not only did the NDPP drop the charges, we also know that KPMG retracted their report. We also know that Judge Kroon published an unconditional apology.”
“I personally, in my experience and in my return to Sars, have seen no evidence that there is any unit or capability in Sars that acts outside of the law.”
The commissioner concludes by making a case for Sars’ need for the capacity to gather intelligence and investigate any areas of fraud within the ambit of the law but adds that he and his organisation respect the bounds of the law.
“I have been very clear that any of our own staff who act outside of the law is a dismissable offence.”
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