25/10/2017 13:01 BST | Updated 25/10/2017 13:01 BST

SARS Failures Mar Gigaba’s First Big Budget Statement

Rock-bottom tax collections underpin an economy in crisis.

Rogan Ward / Reuters
South African Finance Minister Malusi Gigaba speaks to journalists at the World Economic Forum on Africa 2017 meeting in Durban, South Africa, May 3, 2017. REUTERS/Rogan Ward

The decline of the SA Revenue Services is writ large across the 80- page Medium Term Budget Policy Satement released by Finance Minister Malusi Gigaba on Wednesday.

Revenue collection has hit rock bottom, and while SARS has always managed to grow collection in excess of national growth, that pattern of what is called "tax buoyancy" has now been broken.

A stony-faced SARS Commissioner Tom Moyane sat alongside Gigaba in Cape Town on Wednesday, his flamboyant pink kerchief-and-tie combination unable to add gaiety to a grim day for news of tax revenues.

Declining revenues helped decelerate 2017 growth downward to 0.7%. "The period of revenue buoyancy appears to have run its course. The National Treasury projects a revenue shortfall of R50.8-billion."

Over the medium term, the Treasury now expects revenue shortfalls of R69.3-billion in 2018/19 and R89.4-billion in 2019/20. These are massive tax-collection shortfalls, which will ricochet across the economy.

The statement says "This reflects slowing economic growth, but may also suggest a profound shift in the relationship between economic growth and tax collection in the years ahead."

Founding SARS commissioner Pravin Gordhan had established a culture of collection, which ensured that the fiscal pot always grew more quickly than national growth, by a mixture of twisting corporations' arms and investigation to tap new sources of revenue.

Both those practices have now stopped, as Moyane battles declining levels of service by SARS to taxpayers and lower rates of compliance by them.

While Moyane and Gordhan had an acrimonious relationship, which saw the former commissioner stay away from both the Budget and the Medium-Term Budget Statement, he was back at the top table this week. But behind the scenes, Gigaba is concerned and in talks with SARS bosses.

In his speech, he said that: "Government is aware of the concerns raised by taxpayers regarding delays in refunds, and with regard to the capacity of SARS to deal with transfer pricing, increasing VAT fraud and aggressive structuring."