Draft opening remarks by the Deputy Minister of Finance, Mr Nhlanhla Nene, to the standing Committee on Finance on the Presentation of The SARS Strategic Plan 2012/13 – 2016/17
8 May 2012
Honourable members, his Excellency President Jacob Zuma tabled a set of ambitious infrastructure development programmes in his State of the Nation Address earlier this year to set South Africa on a trajectory towards higher levels of economic growth, job creation and the reduction of poverty.
President Zuma proposed interventions which aim to expand economic opportunities through investing in infrastructure, diversifying exports, strengthening South Africa’s links to faster-growing economies, enacting reforms to lower the cost of doing business, reducing constraints to growth in various sectors, moving to more efficient and climate-friendly production systems and encouraging entrepreneurship and innovation.
The realisation of these and other initiatives, as expanded on by the Minister of Finance in his Budget Speech, will require a reliance on a sustainable and growing stream of revenue.
For the medium term it is anticipated that the demands on revenue collection growth will be between 10% and 12% per annum which presents a formidable challenge for SARS and will require ever greater levels of tax and customs compliance from our citizens.
In order for SARS to provide the means for government to deliver on these goals, the cornerstone of all our plans must be to improve the levels of compliance to tax and customs legislation.
To this end SARS has, over the past few years, embarked on a sustained strategy to improve its services, educate the public on their obligations and to detect and deter non-compliance in line with its compliance philosophy.
This strategy has shown itself to be highly effective in encouraging the vast majority of our taxpaying citizens to comply with our laws and to make a fair contribution to the well-being of our nation.
Among the very visible signs of compliance gains since the birth of democracy 18 years ago are:
- The growth in the individual tax register from 1.7 million in 1994 to 6 million in 2010 (the register has since doubled again following a policy change in 2011 to register all individuals in formal employment).
- Over the same period the number of companies registered for income tax increased from 422 000 in 1994 to more than 2 million in 2011/12;
- Registered VAT vendors increased from 397 000 in 1994 to 652 000 at present
- And the number of registered employers grew from 177 000 in 1994 to 385 000 to date.
Honourable members, it is worth re-emphasising that almost every single South African makes a contribution to the fiscus – be it through income tax, Value Added Tax, the fuel levy or the other tax instruments designed to ensure we all share the responsibility for our country’s future.
It is this shared responsibility that has contributed to our fiscal strength and stability growing each year as reflected by revenue increasing from R114 billion in 1994/95 to over R742.7 billion in the most recent financial year.
The critical role of tax compliance in supporting fiscal sustainability and a country’s sovereignty has never been more starkly and publicly displayed than by the current sovereign debt crisis which continues to unfold in Greece.
While much of the focus has been on the unsustainable levels of debt which are crippling that country, one of the root causes of Greece’s debt woes is the lack of a compliance culture in that country
A report by the Greek Central Bank in 2010 estimated that the gap between what Greek taxpayers owed and what they actually paid was about a third of total tax revenue – or equal to roughly the size of the country’s budget deficit.
Our own ability to mitigate the impact of the global economic downturn and to continue with our fiscal policy of counter-cyclicality, sustainability and inter-generational fairness owes a very large measure of its success to the many millions of honest taxpayers who make their fair contribution and the ability of SARS to administer tax and customs in an efficient, effective and highly professional manner.
Of course, revenue collection is highly susceptible to economic cycles and there remain potential risks to revenue from the continued uncertainty in the global economy. The best way to mitigate these risks is for South Africa to continue to build a culture of compliance and to invest in expenditure which will facilitate job creation and economic growth for the future.
The role of SARS in supporting these objectives cannot be under-estimated and the SARS Strategic Plan provides a blueprint for how it plans to pursue it mandate over the next five years.
But SARS cannot be a lone torch-bearer of higher compliance. One of the key risks to continued compliance – and thereby to our ability as a state to implement our programme of action - is corruption and inefficient use of public funds.
The willingness of citizens to pay their fair share is strongly influenced by perceptions of how well that money is spent. Corruption, mismanagement and wasteful expenditure cannot but detract from taxpayers’ sense of making a meaningful contribution for which they receive value for money.
All South Africans and all stakeholders have a shared responsibility to the taxpayers who sponsor our initiatives to ensure we spend this money wisely, efficiently, honestly and effectively.
This committee has a particularly important role to play in this regard and in holding us all to account for this.
With these few opening remarks, allow me to thank the committee for their tireless work in this regard, and to invite the Commissioner to present his overview of the SARS Strategic Plan to you.
I thank you.
Issued by: National Treasury
8 May 2012
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