BUSINESS NEWS - Speaking at the Nugent Commission of Inquiry into tax administration and governance at the South African Revenue Service (Sars) on October 19, acting Sars commissioner Mark Kingon touched on how Sars can be strengthened. He stressed that Sars does not act in isolation, but is part of a global community.
Referring to the importance of international peer reviews, Kingon has requested that a Tax Administration Diagnostic Assessment Tool (Tadat) be performed on Sars to determine its current status. Similarly, the World Customs Organisation will be requested to conduct a review of customs administration at Sars.
Over the last four years Sars has suffered untold damage across the organisation. It must now rebuild. A peer review will, in Kingon’s view, give Sars a foundation on which it can start building.
A year ago, the Organisation for Economic Cooperation and Development (OECD) published Tax Administration 2017, a biennial comparative information series first published in 2004.
The third edition, published in 2008, was signed by Pravin Gordhan, who was commissioner of Sars as well as chairman of the international Forum on Tax Administration (FTA) at the time. Sars was a tax administration to be proud of then, but it has been hollowed out and is now in disarray.
The 2017 report covers 55 advanced and emerging economies, and includes performance-related data, ratios and trends. The data is collected in co-operation with other international organisations, including the International Monetary Fund (IMF). The most important issues discussed have been briefly highlighted below.
Sadly, while Sars has fallen off its world class digital platform, other tax administrations that were lagging behind have now overtaken us, introducing new technologies and analytical tools, improving their administration and easing the burden for their taxpayers.
Other jurisdictions have already introduced best practices coming out of the base erosion and profit shifting (Beps) programme, and South Africa needs to catch up.
Fair enough, National Treasury does formulate tax policy, but some changes would assist Sars in challenging tax avoidance more effectively.
The OECD acknowledges four drivers of ongoing change:
* Improving the effectiveness and delivery of services by using new technologies, tools and data. Sars must re-empower its IT department, allowing its specialists, acknowledged by former Sars chief operating officer Barry Hore to be some of the best in the country, to take over the reins.
* Reducing the cost of tax operations and burdens on taxpayers. Sars is carrying a heavy burden of newly created departments and inept staff. There has been a loss of skills, resulting in drawn-out audits, meaningless queries, delays in refunds, and so on.
* The taking on of new responsibilities. Sars needs to put out some fires before it can think of taking on new responsibilities.
* Implementing the outcomes under the OECD/G20 Beps Project. Sars has done a bit, but is now lagging behind.
A fifth driver is the digital economy. The digital economy is the whole economy, and many brick and mortar businesses are changing the way they do business. Digitisation enables transactions to be routed through different entities in a hundred different jurisdictions in micro seconds. Having the forensic expertise to interrogate digital data is essential. South Africa may have introduced regulations to require offshore providers of electronic services to register for Vat, but there are still tax leakages in the digital economy.
