This can be deduced from the medium-term budget policy statement (MTBPS) indicating that tax compliance concerns are mounting in the context of tax administration challenges and weakening tax morality.

The expected shortfall in tax collections in the current financial year jumped to R50.8bn, the highest since the international financial crisis in 2008/09. The budget deficit also jumped from 3.1% of GDP projected in February to 4.3% now.

The MTBPS said that policy and administrative factors may also be contributing to the shortfall. But behavioural responses to tax increases may be larger than anticipated and revenue could perform below expectations even if taxes are hiked.

“Compliance concerns are mounting in the context of tax administration challenges (delays in refunds for example) and weakening tax morality. Implementing the recommendations from the Tax Ombud’s report on delays in the payment of VAT refunds by the South African Revenue Service will help to improve taxpayer confidence in revenue administration.”

Tax collection growth and economic growth 

The MTBPS also notes that a profound shift in the relation between tax collection growth and economic growth (with tax collection growth proportionally weakening) may have taken place and might continue in the coming years.

Finance Minister Malusi Gigaba also referred to this in his mini-budget speech and said the fairness and integrity of the tax system are critical for the deep social contract between the government and the people. “It is important that we continually strengthen tax morality and deal with underlying causes that may undermine it.

“Whilst most of our taxpayers remain responsible, we are noting slippage in compliance. SARS has enforcement powers, which are in the main punitive and this will be applied to taxpayers who willfully and cynically avoid paying their taxes,” he warned.

He said SARS remains sensitive though to taxpayers who are facing challenges.

“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 tax structuring," said Gigaba.

"I am engaging with the commissioner of SARS on the recommendations made in August by the Tax Ombud and to take concrete and practical steps to help improve taxpayer confidence,” he added.

News24