21 February 2024

SARS … at your service?

Johannesburg, 19 February 2024 – Whilst many are speculating as to what tax increases or incentives the Minister of Finances will announce in his 2024 Budget Speech on 21 February, questions may also arise regarding the plans to further capacitate the South African Revenue Service (SARS) to expand the tax base and improve overall tax compliance. Somaya Khaki, Project Director: Tax at the South African Institute of Chartered Accountants (SAICA), takes a closer look.

Global research, in both developed and developing countries, has over the years found there to be a significant relationship between tax morale and tax compliance. From an African perspective in particular, an improvement in tax morale was noted, and this was attributed to various factors.

These factors include, inter alia, improved trust in the tax administration based on taxpayer perceptions of the quality of service provided by that administration. Linked to this is the perceived legitimacy of the tax administration, as well as how taxes paid are spent by government. Another important factor is the ease of paying taxes, which includes clarity and certainty in terms of one’s obligations, as well as the ease of engaging and facilitating submission of returns and making payments (which includes the efficient use of technology).

Given South Africa’s history and the findings of the Nugent Commission of Inquiry into Tax Administration and Governance by SARS (published in December 2018) it is questionable as to where South Africa featured from a trust perspective. The Nugent Commission’s main finding was that the failings of SARS stemmed from a ‘massive failure of governance and integrity’. To address this and restore SARS’ status as a trusted, efficient tax administration, sixteen wide-ranging recommendations were made, which were further broken down by National Treasury into 27 recommendations.

The current SARS Commissioner (the CSARS), Edward Kieswetter was appointed in 2019 and his focus was, and still is, creating a ‘SMART Modern SARS’. This includes stabilising the organisation, re-establishing integrity and compliance functions, and restoring employee confidence and public trust through a variety of measures.

Five years later it appears, at least on paper, that many of the Nugent recommendations have been implemented. Implemented recommendations include an internal re-organisation, the re-establishment of the Large Business Centre, re-appointment of senior SARS officials who were displaced, heightened focus on illicit trade, investment in technology and increased reliance on artificial intelligence. Technological advancements include the introduction of the auto assessment process which, in SARS’ view, has contributed to improved compliance, as this makes it easier for taxpayers to comply and requires minimal effort on their part. A more recent measure that was implemented was the appointment of three Deputy Commissioners in June 2023, with the aim of strengthening the executive and improving overall governance.

From a revenue perspective, SARS has over the last few years reported an increase in tax collections. The Minister of Finance, in his 2023 Budget Speech, attributed this to ‘a more efficient and effective tax administration’, which ‘is building trust to increase voluntary compliance and boost revenue collections.’

In some respects, it may be said that progress has been made in efforts to restore SARS to its ‘former glory’. From a recognised controlling body perspective, the restructuring of SARS and empowerment of the SARS regional directors and segment leaders have certainly contributed to improved communication and the building of more trusted relationships. SARS is more responsive to escalations of operational queries, which has benefited South African taxpayers at large.

There have unfortunately been instances where despite issues being resolved, it is not always as promptly as is needed; especially when the issue is due to a system error impacting several taxpayers. This could potentially result in financial consequences, like penalties or lack of access to a tax clearance certificate, and often requires the taxpayer resorting to the normal, non-technological channels for resolution, which could take a long time. In some cases, the challenges experienced seem to recur year on year – a look at the escalations by tax practitioners is a clear indication of this.

A comparison of SARS operational queries received from members on SAICA’s online platform, excluding queries via other avenues, demonstrates an 88% increase in complaints from 2020 to 2021, and a 40% increase from 2021 to 2022, after which there seemed to be some stability for a year. This is potentially attributable to additional channels made available to taxpayers and tax practitioners by SARS, as well as more direct access by tax practitioners to SARS staff in certain SARS regions. However, one and a half months into the year, and it seems that escalations in 2024 will exceed those of the prior year by at least 10% - potentially indicating that the number of complaints is growing.

Common, or rather, systemic complaints include delays in the registration of taxpayers or tax types, delays in the payment of refunds, delays in finalisation of verifications (mostly where refunds are due) and disputes, with some issues taking years to resolve. In addition, delays in the finalisation of deceased estates are a particular sore point given the stress caused to the bereaved and the fact that those who may need their inheritance have to wait until tax matters are finalised. Whilst not as many in numbers as the other complaints, there has also recently been an increasing number of escalations regarding refund fraud – where refunds from compliant taxpayers are being fraudulently diverted into bank accounts of those gaining access to the e-Filing profile of the relevant taxpayers.

Over and above these systemic issues, an overarching complaint is the lack of access to SARS. Whilst the strategy is to promote more digital or online access, which has rapidly progressed as a result of COVID, many find this shift extremely unhelpful especially when these online options are not available or don’t work as they should. It’s a case of when it works, it works really well, but when it doesn’t there is chaos. Further, whilst the initiation of most services is online, the completion thereof is done in the ‘back office’. There are many complaints of delays in this regard, which may indicate a lack of sufficient capacity to deal with the service requirements. Of course, there may also be deficiencies on the part of the individual which can be addressed via education, which SARS seems to be making increased efforts with.

Where the digital channels yield no or unsatisfactory results, the only options are the SARS Contact Centre or the online appointment system, but even these seem to be failing for some time now. The waiting times for the SARS Contact Centre can be extremely long, especially in the case of tax practitioners, who sometimes wait up to two hours on the line only for the call to be cut off either before reaching an agent or after asking the agent for assistance. No appointments are available on the online appointment booking system, something reported to SARS months ago, but which remains unresolved. For compliant taxpayers who want to do the right thing and have engaged a tax practitioner to assist, the lack of access is frustrating their efforts and there is a perception that there is a failure on the part of SARS to actually ‘serve’ taxpayers effectively and timeously.

Whilst efforts are being made to rebuild trust and provide clarity and certainty, with the aim of promoting compliance, taxpayers may be questioning whether compliance is really worth all the effort when not enough is being done to address their daily frustrations with access to service.

Over the last few years, the National Treasury has allocated more budget to SARS to build capacity in various areas, and whilst SAICA hoped it would see a decline in complaints, this has unfortunately not been the case.

Whilst SARS may be improving in leaps and bounds concerning the use of artificial intelligence and enhanced reporting and pre-population capabilities (creating the ‘SMART Modern SARS’ with ‘world-class systems’), unless these day-to-day challenges with respect to ‘simple issues’ are promptly resolved, there is a risk that all the efforts and progress made will not be enough to maintain a compliant, moral taxpayer base in the long term. We hope that plans to address these challenges will be shared in the upcoming Budget Speech.


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