By President Cyril Matamela Ramaphosa
Dear Fellow South African,
Last week I visited the South African Revenue Service (SARS) National Command Centre in Tshwane to commend and congratulate its staff and leadership on their outstanding work.
In the last financial year, SARS achieved the highest revenue collection in the tax authority’s history, collecting R2.3 trillion. These revenues collected into the fiscus return to our citizens as lifeblood. Basic services are delivered, social grants are paid out to society’s most vulnerable, public infrastructure is built and maintained, and the machinery of government is kept running.
In many ways SARS is a standard-bearer for a capable state. It has been a trailblazer in the use of technology to construct a citizen-friendly ecosystem, making it easier for taxpayers to meet their obligations. It is little wonder that SARS is regarded as one of the best tax authorities in the world.
The South African Revenue Service also stands as a credible blueprint for rebuilding institutional capacity in the wake of the state capture era.
In 2018, I appointed a commission of inquiry into SARS headed by Judge Robert Nugent. When the commission began with its work, SARS was crippled by political interference, leadership purges were commonplace, and specialist enforcement capacity had been substantially dismantled.
Morale at the tax authority was at an all-time low and revenue collection had been significantly weakened. Levels of compliance were steadily declining, with both corporate income tax and personal tax collections down.
Seven years since the Nugent Commission issued its recommendations, nearly all those recommendations have been implemented. Among the key recommendations were restoring capable independent leadership and governance, restoring compliance and enforcement capabilities, modernising systems, and improving efficiency and services to taxpayers.
As a consequence, the tax authority has achieved a turnaround that has exceeded expectations.
Just five years ago, public trust in SARS stood at 48%. It is now around 75%. Attitudes towards tax compliance also continue to improve.
SARS played an important role in South Africa’s exit from the Financial Action Task Force (FATF) grey list and in the sovereign credit ratings upgrade from S&P last year.
Certainty in tax policy and honesty and efficiency in tax administration is a key consideration for investors looking to bring their business to our country. It sends a strong signal that South Africa is serious about institutional integrity and regulatory certainty. This is confidence that is hard to price, but easy to feel when a core institution like SARS regains public and investor trust.
For citizens, an efficient tax administration translates into a more reliable revenue stream for grants, infrastructure and basic services. For businesses, this means fairness and predictability.
The rebuilding of SARS illustrates the value of commissions of inquiry. Not only did the commission unearth the full architecture of wrongdoing but it proposed steps to ensure that there is no recurrence. Credit must go to the leadership and staff of SARS for implementing the recommendations with diligence.
As we continue in our efforts to build an ethical, capable state and prevent a recurrence of that dark period in our nation’s history, we will look to SARS as an example of what can be done when institutional integrity is restored. Just as state capture took place over a prolonged period of time, the work of rebuilding will not happen overnight.
Recommendations have been and will continue to be acted upon. Laws and processes have changed. Investigations have been undertaken and prosecutions have been initiated. Most importantly, institutions have been rebuilt.
The turnaround of SARS has shown what is possible with a clear mission, committed leadership and capable people.
