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4.3.1 DOMESTIC RESOURCE MOBILISATION (DRM)
Revenue under-collection: The assessment, confirmed by various studies, reports a significant revenue under-collection. Two main components make up this revenue under-collection. The first is the theoretical Tax Gap, and the second is contingent items on balance sheet that holds financial value, such as undisputed debt, unresolved disputes, and outstaying returns. In this regard, SARS had reported an amount of ±R800 billion in under-collected revenue.
South Africa, during its G20 Presidency, has placed a renewed focus DRM. The case for this greater focus is based on a consensual view, supported by the IMF, is clear, and informed by:
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Low tax/GDP levels mean there’s more revenue to collect - global average is 15% Unsustainable levels of debt places greater reliance on tax revenues Unpredictability of Donor and Aid Funding Address arbitrage between statutory vs effective tax rates Proliferation of Cross-Border & Domestic Tax & Financial Crime
100%
R2.541 trillion estimated true
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R1.061 trillion gross tax gap (Known under recovery) – 42% of estimated liability.
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tax liability due (100%).
42%
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DRM remains the most cost-effective means to fund government programmes, and establishes a path to fiscal self- reliance over the long term The foundational elements of effective DRM include:
R1.480 trillion total taxes paid voluntarily and on time – 58% of total liability.
58%
R261 billion collections from SARS compliance programme (administrative actions) – 10% estimated tax liability or 15% of net recovery.
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Understanding the Indivisible nexus between policy and administration Modernising revenue administration, leveraging enabling technology, applying Artificial Intelligence (AI), future proofing employees Expanding the tax base is imperative - in this regard: • Tax policies should be simpler, equitable, transparent, and encourage voluntary compliance • Informal and cash-based sectors must be incorporated into the formal sector Public Trust beyond reproach - sacrosanct for voluntary compliance
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± R800 billion net tax gap – 32% under recovery from estimated liability.
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Figure 4: Tax Account Reconciliation as at 31 March 2024.
Tax liability
Tax paid
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SARS Modernisation White Paper 2025/26 – 2029/30
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