The economic downturn has impacted negatively on the overall revenue collected by the South African Revenue Services (SARS).
"A clear indication of the prevailing economic downturn experienced during 2009/10 is reflected in the revenue performance reported in our annual report, which showed a year-on-year decline in overall revenue of R26.4 billion," SARS Commissioner Oupa Magashula said on Thursday.
This is the first time in the 13-year history of SARS that revenue collection has declined in a 12 month period.
Magashula, who was addressing the Parliamentary Standing Committee on Finance and Select Committee on Finance, said collections from Personal Income Tax - which was buffered by above inflationary wage increases - the fuel levy and excise duty showed year-on-year gains.
These, however, were not enough to offset significant declines in Corporate Income Tax, which was R30.2 billion or 18 percent lower, VAT which was R6.4 billion lower as well as Customs Duties which was R3.2 billion or 14 percent lower.
The Revenue Service's debt book grew by 23 percent to R85.8 billion, while at the same time the credit book - which is a reflection of payments to SARS which have not yet been allocated - declined by 7.3 percent to R42.2 billion in 2009/10. In 2008/2009 it was at R45.5 billion.
The increase in debt is a reflection of the hard economic circumstances in which both corporate and individual taxpayers found their ability to pay, whether on time or not at all, has been affected.
"At the same time, the economic conditions over the past 18 months have accentuated the challenges we face in both debt and account maintenance across multiple tax types, periods and systems," said the commissioner.
In anticipation of moving to accrual accounting in 2012, as part of SARS Modernisation Programme, significant gains have been made in providing the taxpayer with a statement of account on demand, as well as the redesign of the PAYE submission, reconciliation and payment process and the expanded use of eFiling.
Over the course of the next two years, SARS plans to introduce a system which is in line with modern banking, whereby taxpayers are in control of their accounts, payments and transfers, which should reduce both books.
"We believe this process will also necessitate a review of the current debt write-off policy to remove unrecoverable debt," said Magashula.
Due to the decline in revenue collection, there was a slight increase in the cost of collection that rose from 1 percent over the past three financial years to 1.2 percent in 2009/10.
The revenue service also reported an improved compliance of returns submitted on time. By the end of Tax Season 2009, SARS had received over 3.1 million returns compared to the 2.3 million of the previous year. In Tax Season 2009, it took eight weeks to reach 1 million submissions, while this year it took seven weeks to reach the 1 million mark.
During 2009/10, over 270 000 penalty notices to taxpayers with multiple outstanding returns - resulting in the submission of over 80 000 late returns - were issued. A few weeks ago, approximately 60 000 IT88 Agent Appointment notices to recover outstanding penalties from defaulting taxpayers' salaries were issued. Additionally 16 000 VAT vendors were suspended following on the clampdown of fraudulent VAT claims.
"A credible threat of detection and enforcement for those who fail to meet their obligations is an essential ingredient for a fair and equitable tax system and we plan to further expand the use of administrative penalties, third party data and risk detection for those who continue to skirt their obligations," the commissioner told the committees.
SARS has seized illicit and counterfeit goods, including 560 cloned cheques to the value of R7.8 million and 67 million cigarettes to the value of R33 million.
The Auditor General gave SARS an unqualified audit report for 2009/10, the sixth in a row. - BuaNews