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FIFI PETERS: This is the second year in a row where revenue collections in this country exceeded expectations. The difference this time around is just north of R90 billion that we heard from Treasury exceeded their initial estimates. That difference is explained by the fact that revenue from corporate taxes was higher, and revenue from the personal taxes that we paid was higher, as was the revenue Sars received from custom receipts.
That’s great, but what does this mean for the picture of the road ahead? We’ve got Johnstone Makhubu, who is the chief revenue officer at Sars [with us]. Johnstone, congratulations, given that the minister even congratulated your commissioner, as well as the office, for the outperformance as it pertains to the role that Sars played in getting South Africans to pay what was due unto Caesar. Let’s just talk about that and how you rate the level of tax compliance right now.
JOHNSTONE MAKHUBU: Thank you, Fifi. We appreciate the opportunity to be on your show. Indeed, we appreciate the minister’s reflections on the work that we do. We see it as privileged work.
We see compliance slightly improving overall – by almost 1.45 percentage points from the opening on April 1 [2022].
Largely we see compliance that is almost exemplary in the large business segment.
You would recall that we relaunched the business, large business and the international segment when Commissioner [Edward] Kieswetter joined, and we are seeing some yield in terms of compliance in that particular environment.
We continue to be concerned about compliance in the small and medium enterprises [SMME] space, where we feel that we still have a lot to do in terms of educating and outreaching to those particular taxpayers.
So our large businesses and international businesses are buoying up our compliance levels, but we think that we still have a long way to go in terms of the SMME segment – as well, if I may add, as provisional taxpayers in their personal income taxes.
We think if there are opportunities going forward, that’s where they lie, and we need to look intently into that, and we’ve set ourselves up to look into those opportunities.
FIFI PETERS: So in essence, if you’re not doing right by your taxes right now, you’d better start because Sars is onto you.
I’d also like to understand how much of this higher revenue collection was as a result of efficiencies at Sars, and how much of it was as a result of companies paying you more in the year under review in taxes, as well as individuals and the custom receipts. Just give us that split.
JOHNSTONE MAKHUBU: We collected about R167 billion to January 31, 2023, from the beginning of the financial year in April.
That is assigned uniquely to the efforts that Sars has put into effect to shore up whatever gains we were getting from the likes of the manufacturing sector and the financial services sector, which were quite significant, as well as the mining sector, even though we are seeing a year-on-year contraction.
But we still see elevated levels of contribution from that sector, which is higher than what it was pre-Covid.
So beyond those three sectors of the economy buoying us up, we have contributed to our own efforts, and we’ll continue to look for opportunities to contribute in an increasing manner even as we go towards the end of the financial year, March 31. So far, by the end of January 2023, we collected a total of R167 billion, and we believe that in the last two months of the financial year we will see that increasing steadily.
FIFI PETERS: I’m glad that you mentioned some of the profits across companies in South Africa, the various sectors, and particularly mining, indicating that there has been a slowdown in profit growth, because that was what another really smart tax person I heard say in terms of his analysis. He was saying that if you look at the amount of money that companies are having to pay right now to keep their operations going, to keep their lights on because of load shedding, those diesel bills or the load shedding bills are coming to millions of rands.
What that translates into, according to his view – this was a speaker from Deloitte – is that you’ll have lower profitability because your expense bill is higher; it translates into lower profits, and it translates into ultimately a lower tax income for you as Sars.
We have had two years in a row right now where, coming from the pandemic, you’ve exceeded your revenue collection targets. Do you see a puncture in the road ahead, just as a result of load shedding?
JOHNSTONE MAKHUBU: Look, we have been stating publicly, through our commissioner, that we are concerned about load shedding. We believe that it is playing a role in affecting the mining sector. For instance, you would know that we are responsible for customs as well as the taxes in the country.
So we monitor quite strongly the exports from the mining sector. We’ve seen, year on year, a drop in volumes that have been exported.
Partly of course there is a logistics issue here that we are aware of, but also there is a load shedding issue that is causing the drop in volumes from an exports point of view.
But again, going forward we cannot deny the fact that we are likely to see that impact. My sense is that some of the bigger businesses might have insulated themselves.
We have seen imports of large standby generators – generators of commercial size.
We are also seeing solar panels, inverters, batteries, lithium-ion batteries coming through our declaration systems.
We are seeing it in two ways. One, we’re seeing, yes, load shedding is affecting businesses, but we think some businesses have insulated themselves – hence the taxes from corporates that we saw at the end of December were rather increasing year on year by 9.6%, which means that there’s some insulation. Alternatively, there is a delayed impact that is likely to be seen, in the year that we are approaching, from a financial-year point of view.
However, I think we are also of the view that there’s an amazing subsector in the electricity, gas, and water sector of the economy, which is the renewable sector.
We are closely monitoring it and looking at it because we believe that it has the capability to give us an upside, while we acknowledge that overall profits are likely to be under pressure because of load shedding.
FIFI PETERS: All right. So load shedding is potentially the hand that takes away, but it’s also the hand that gives.
