SARS Commissioner Edward Kieswetter has expressed concerns about hiking taxes, saying it may not be the best solution. Instead, he believes investing in SARS would help collect the estimated R700 billion to R800 billion in uncollected taxes.
Kieswetter notes that the last VAT increase in 2018 did not significantly boost revenue. He suggests that modernizing SARS would improve tax collection, broaden the tax base, and enhance compliance.
The estimated R700 billion to R800 billion in uncollected taxes includes R450 billion to R460 billion from theoretical modeling and over R300 billion from outstanding tax returns. Kieswetter emphasizes the need to address South Africa’s unsustainable fiscal debt burden, which may rise to 80% of GDP in the next three years.
National Treasury initially expected R1.86 trillion in tax revenues for 2024/25 but revised this figure downward to R1.84 trillion due to decreased personal income tax, VAT, and fuel levies. PwC predicts a further reduction of R10 billion, mainly due to lower-than-expected VAT collections.
Old Mutual economist Johann Els argues that a VAT rate hike may be necessary, citing the improving economy and the need to send a positive message to markets and investors.