Sars lied about tax compliance figures
The auditor-general found that the SA Revenue Service (Sars) breached regulations by inflating compliance figures for corporate and personal income tax, in his latest report.
This was among the shocking evidence heard on Tuesday by the Sars commission of inquiry into governance and administration at Sars.
The actions by the tax agency were described as "very serious" by both evidence leader advocate Carol Steinberg and member of the commission, professor Michael Katz, who warned that it had far-reaching implications for the budgeting process and future tax periods.
The commission also heard that the R48bn hole in revenue could not just be attributed to economic factors, but was self-inflicted and if the evidence presented before the inquiry was anything to go by, Sars's revenue collection woes are far from over, which could mark yet another blow to SA's weak fiscal position.
Two presentations from senior officials showed that Sars debt had risen from R85bn in 2015 to R135bn last year and that compliance levels had dropped dramatically. The evidence before the inquiry on Tuesday revealed the increase in debt, a real drop in compliance and manipulation of compliance figures. This, coupled with findings by the tax ombudsman that Sars was unnecessarily withholding refunds, suggests that there may even be questions around whether Sars actually collected more than R1-trillion in revenue, a milestone which suspended tax boss Tom Moyane and his loyalists have boasted about.
The commission, chaired by retired judge Robert Nugent, also heard how Sars told "half-truths" to parliament on compliance and how the critical and world-renowned compliance unit at the tax agency was destroyed in the restructuring by consultants Bain, under Moyane.
During the second leg of public hearings in Pretoria, Steinberg described the evidence she received on the "very serious finding" by the AG, saying it was submitted in the form of an affidavit from a Sars official whose identity she could not reveal due to confidentiality agreements.
She told the commission that the AG made two negative findings against Sars. Sars had overstated its compliance levels for both personal income tax and corporate income tax in its public documents - a move likely aimed at bolstering its public image. She said regulations gazetted on how to measure compliance as well as the income tax act had been flouted.
Current Sars "domain specialist" and former group executive for tax and customs compliance and risk, Thabelo Malovhele, who was giving evidence to the inquiry, then revealed that "some" in the organisation believed compliance figures could be improved by "working the numbers" or "changing definitions".
Katz appeared exasperated at the revelation, saying such a move could impact on budgets and tax for future periods.
Steinberg said this changing of definitions of tax types meant, essentially, that "a group of taxpayers" were exempted from filing corporate income tax returns but received VAT refunds.
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