Nhlanhla Nene says corruption and slow economic growth may impact revenue collection

Minister of Finance, Nhlanhla Nene said during the annual Tax Indaba at Sandton Convention Centre that corruption and the slow growth of the economy might contribute to slow tax revenue collection.

The Tax Indaba which began on 10 September saw thousands of delegates gather in Sandton to discuss numerous tax topics. At this year’s Indaba, Nene highlighted that while tax revenues may be taken for granted by citizens, lower tax revenues have serious consequences.

More recently, however, there has been more public debate surrounding tax revenue although much of this is due to the R79 billion tax shortfall experienced in the past two years.

This shortfall resulted in income and capital gains tax being increased and then the increase of Value Added Tax. Nene added that slow economic growth might further risk revenue collection.

SA Institute of Tax Professionals CEO Keith Engel: Hike in the rate of value added tax (VAT) from 14% to 15% was a “desperate move” to plug the government’s revenue gap. Speaking at the 2018 Tax Indaba. pic.twitter.com/BxYANANaKU

— Justin Brown (@JustinBrownSA) September 10, 2018

The increased pressures on the economy may also contribute to lower revenue collection. Just last week, Statistics South Africa announced that the South African economy had contracted by 0,7 per cent in the second quarter of the year.

@sarstax @DrBericCroome @SAIPAcomms @saica_ca_sa Some of the country’s top minds getting ready for a panel discussion titled “In conversation with the Office of the Tax Ombud” at the Tax Indaba at the Sandton Convention Centre. #WeSpeakFairness #TaxOmbud #TaxSeason2018 pic.twitter.com/FliIgWSTYf

— Tax Ombud SA (@TaxOmbud) September 11, 2018

“Cabinet last week emphasised that constraints to growth will be addressed. We must spare no effort in raising the level of economic growth, but must also equally work hard to fix public finances.

“The tax revenue shortfalls over the past few years have partly been due to the fact that the economy has been growing slower than had been projected. However, we cannot ignore the potential impact of a reduction in the effectiveness of tax administration.”

Nene added that this lack of trust in the South African Revenue Service might lead people to pay as little tax as possible, which not only harms our financial position but also creates more social discontent.

I could listen to Judge Ngoepe the whole day. @TaxOmbud @taxindaba #Taxindaba2018 #TaxOmbud. Best constitution but worst conditions poverty, people marginalized. Sho!

— Moira Malakalaka (@moiralux) September 11, 2018

Mark Kingon, the acting head of the revenue service also spoke at the Indaba and said that the reputational damage done to Sars has had a far-reaching impact and they are committed to changing these perceptions by doing their work with integrity and within the framework of the law.

“Government has an obligation to act ethically and correct any possible failings as far as possible, but equally so, individuals and corporates have an obligation to act in a responsible manner,” concluded Nene.

@sarstax EXCO is now on stage discussing key points of revenue collection. #TaxIndaba2018. @taxindabasa pic.twitter.com/2xh6YvhQvz

— SA Revenue Service (@sarstax) September 10, 2018

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