14
4.2 External Factors External dynamics present opportunities for SARS to leverage global trends and domestic priorities while mitigating threats from economic volatility and illicit activities. These factors underscore the need for agile modernisation, including e-invoicing, AI-enhanced detection, and international partnerships. 4.2.1 DOMESTIC FACTORS 4.2.2.1 STRENGTHS • Government Policy: In July 2024, following the Opening of Parliament, the President announced and confirmed the Strategic Priorities for the 7th Administration of the South African Government. These priorities are aligned to the goals and objectives of the National Development Plan and Programme of Priorities of the Government of National Unity, and are encapsulated in the Medium-Term Development Plan as: » Strategic Priority 1: Inclusive Growth and Job Creation. » Strategic Priority 2: Reduce Poverty and Tackle the High Cost of Living. » Strategic Priority 3: A Capable, Ethical, and Developmental State. The work of SARS, as outlined in this Strategic Plan, is designed to enable government to realise these priorities. • Inflation: Inflation generally remains below the mid-point target of the South African Reserve Bank (SARB). In May 2025, SARB reduced the repo rate by 25 basis points, bringing it to 7.25%, bolstered by an inflation rate that slowed to 2.8% in April 2025. Inflation is below SARB’s mid-range target of 4.5% and signs are emerging of a recovery in economic growth, after weak performance through 2023 and the first half of 2024. In the near term, SARB expects output to benefit from various tailwinds, including lower inflation, higher disposable income, and extra spending from pension withdrawals via the new Two- Pot system. SARB’s policy path will likely remain flexible, driven by moderating inflation, although upside risks are rising. The high interest rate remains an impediment to economic growth. • Currency: The rand closed at R18.18/$ in December 2024. Donald Trump’s re-election as the U.S. president saw a
» Compliance and Enforcement: Recovered R20.2 billion through audits and investigations in 2023/24; 82.80% automation for complex cases; collaborations with law enforcement yielded R260.5 billion in collections. For 2024/25, net revenue collection reached R1.855 trillion, representing 100.55% of the revised estimate. » Workforce and Governance: Staff of 12,805; introduced Career Progression Framework, Talent Management Policy, and digital platforms for upskilling. Integrity initiatives include ethics e-learning for 2,817 employees, with a target for zero tolerance of integrity breaches by 2028/29. » 4.1.2 AREAS FOR FURTHER IMPROVEMENT » Funding and Resource Constraints: Budget growth of only 3.46% over ten years amid 260% caseload increase and 20% staffing decline; ICT investments at -0.24% of allocation (below 2% target). Requested R13.6 billion over the medium term but allocated only R3.5 billion, impacting modernization. A one-off R1 billion injection in 2024 provided temporary relief, but sustainable funding is needed to address an estimated R800 billion tax gap. » Talent and Engagement Issues: Difficulty attracting/retaining critical skills (e.g., in data science, AI) due to competition and finances; sub-optimal leadership and corporate practices affect employee-centric culture. Fragmented data across systems impairs effective taxpayer engagement. » Operational Gaps: Challenges in case management integration, dispute prevention, and knowledge management reduce efficiency. Procurement variations (e.g., R1.29 billion for ICT) highlight dependency on external vendors. Not all taxpayers/ traders are registered, fulfil obligations, or are detected for non-compliance; disputes require significant resources for administrative resolution, ADR, litigation, or settlements. » Revenue Performance and Compliance Shortfalls: Studies, including SARS assessments and independent sources like the Davis Tax Committee, indicate uncollected revenue, with voluntary payments and compliance program outcomes implying total revenue performance around 60% (see presentation “Making the Business Case for Investments in Tax Administration”).
SARS Modernisation White Paper 2025/26 – 2029/30
Made with FlippingBook - PDF hosting