A durable boom in consumer spending and strong salary increases are helping to swell government coffers as economic growth picks up speed.
”Revenue collections are going very well, both in respect of consumer activity and PAYE. We are very bullish about revenues,” South African Revenue Service (Sars) Commissioner Pravin Gordhan said on Thursday.
Last year the revenue service missed its R303,3-billion revenue target by a hair after intense collection efforts, as the strong rand hurt profits of exporters and resource companies.
This year’s target is R333,7-billion — an increase of about double the rate of inflation.
Gordhan says company tax is steady, but it is too soon to say whether the improved economic climate has delivered better profits across the board.
”Some resource companies are still suffering from the rand, and companies will always be a bit uncertain, but the impact won’t be as dramatic as last year because we have now built in the new conditions,” he told the Mail & Guardian.
Strong revenue collection is not only an important indicator of economic activity — it also has a direct impact on the size of the budget deficit, and with it the government’s tax, spending and borrowing decisions.
”If he is optimistic on the revenue side from consumer spending, that will come through in those companies, but we will still need to see to what extent the export recovery shows up in profits,” said Sanlam chief economist Jac Laubscher.
Gordhan was speaking on the release of Sars’s 2003/04 annual report, which, for the first time, received an unqualified audit report from Auditor General Shauket Fakie.
The revenue service had previously been dogged by a succession of accounting and internal control weaknesses, factors Gordhan said are now largely under control, although problem areas do remain.
Fakie’s report mentions several concerns relating to the customs division and stressed the importance of achieving annual targets.
Sars is having more difficulty putting another one of its legacy problems behind it: Edward Mushanganyisi, the general manager for internal audit, was suspended in July 2003, and more than a year later disciplinary proceedings against him have still not been completed.
Mushanganyisi was a member of the revenue service’s executive committee, and one of its most senior managers.
”There is a lot of filibustering happening in the industrial relations process,” Gordhan said. ”Labour laws can be abused.”
”It takes two to tango, and if one is about to lose one’s job, one may not want to tango,” he went on.
Sars did not want to release details of the case, but Gordhan did not dismiss the possibility of eventual criminal charges. The police will decide how to proceed once the internal disciplinary process is complete, he said.