SARS Commissioner Edward Kieswetter has told G20 finance ministers that increasing tax revenue should prioritize enhancing collection capacity rather than raising tax rates. This stance aligns with his previous concerns about the proposed VAT hike in South Africa’s budget, which was ultimately delayed. Kieswetter emphasized that raising taxes has consequences, potentially stifling economic growth and reducing the tax base.
He argued that higher taxes require increased compliance efforts, which are challenging with existing inefficiencies. Furthermore, he stressed that public trust is essential for compliance, and this trust is undermined when taxes are perceived as inequitable or poorly spent. Global leaders at the G20 meeting echoed Kieswetter’s views, emphasizing the importance of improving tax administration and spending efficiency.
IMF Managing Director Kristalina Georgieva highlighted that public appetite for tax increases is low, particularly after recent economic shocks. She suggested that countries can mobilize revenue by curtailing tax exemptions and deductions, which often benefit those who need them least. Georgieva also pointed to the potential of digitalizing tax administrations, like SARS, and implementing pro-growth tax systems.
World Bank Group President Ajay Banga emphasized the need to broaden the tax base rather than raising rates, reduce exemptions, and modernize tax administration. He also stressed the importance of transparent and efficient government spending. Kieswetter noted SARS’s efforts to integrate AI to improve efficiency and compliance, but underscored that building public trust remains paramount. The general consensus was that efficient tax collection and effective government spending will lead to increased tax revenue, more so than simply raising tax rates.