SARS commissioner Edward Kieswetter says that headlines beating the drum on emigration eroding South Africa’s tax base are overstated, with the data at hand not reflecting any significant impact on tax collections.

Speaking in a PSG Think Big webinar on Tuesday (7 February), Kieswetter said that just more than 6,000 people emigrated from South Africa in 2022, with smaller numbers seen at the top end of the earnings bracket.

“We need to understand better the actual quantifiable impact of emigration,” he said. “Let’s just put it where it belongs.”

While the “quantifiable impact” of emigration is not to be dismissed or trivialised, he said, the overall impact on the national fiscus is nothing that would grab any headlines.

The real damage being done by emigration comes through “soft impacts” – for example, reputationally, the damage can be quite significant for the country; people are losing confidence in the system.

A bigger risk to tax collections and the so-called “shrinking tax base”, however, are high levels of non-compliance from those who are still in South Africa.

“In South Africa the bad news is the good news. We have so much corruption, so much theft; we have so many levels of non-compliance, that if we just focused on addressing the opportunity landscape, we have so many low-hanging fruits for improved revenue collection,” he said.

Another positive spin on the problem is that – wider economic issues notwithstanding – tax compliance is growing, and even with the current levels of non-compliance, revenue collections are also increasing.

This means that there is room for even greater tax collection in the country as SARS brings these taxpayers into the fold – something the commissioner calls the “compliance dividend”.

In practical terms, SARS can offset any losses from capital flight by turning non-compliant taxpayers back home into honest citizens that pay their dues.

Kieswetter said that this does not mean that the revenue service is pushing for higher taxes – on the contrary, he said that the tax burden on South African taxpayers should be lighter.

“SARS is of the view that the compliance dividend means that there is no need to raise taxes,” he said.

The collective mindset between SARS and the National Treasury is that authorities need to improve the administration competence (ie, get better at collecting the taxes that are already due) and not add to the burden on taxpayers, he said.

This has been a key strategy for the group over the last few years, where it said it wants to make it easy for taxpayers to be compliant and make the cost of non-compliance much higher.

Targetting the wealthy

One of the measures put in place by SARS to increase compliance and revenues is the perceived targeting of wealthy individuals in the country.

On top of talk from politicians around a ‘wealth tax’, SARS itself has set up a specialised high-net-worth unit to focus on top earners with assets totalling more than R50 million.

Kieswetter said that while politicians may use a wealth tax as part of their rhetoric – like the ANC wanting to use a new tax on the country’s richest 5% to fund a basic income grant – as far as SARS is concerned, if everyone pays their due, there is no need for another tax.

If every high-net-worth individual pays the taxes they should be paying, he said there is no need for an additional wealth tax.

Kieswetter also downplayed the idea that SARS is specifically “coming after” rich taxpayers in the country through heightened scrutiny.

Many in the tax industry have characterised SARS’ HNWI unit as a push from the group to rein in unchecked wealth. Indeed, the revenue service has been more aggressive with its approach to this segment – but it is still only pursuing revenue it believes it is already owed.

SARS has characterised the unit as being “helpful” to these individuals and assisting them with their tax affairs and ensuring they are compliant so it does not need to pursue them through the courts.

According to Kieswetter, SARS doesn’t apply subjectivity to its tax processes – in other words, it isn’t going after anyone in particular.

He said that the revenue service’s actions are objective and data-driven, using machine learning and AI algorithms to determine who to “target”.

The process is determined by risk profiles – and the group has been tapping into various data sources, both local and global, to get as much data and information on taxpayers to build these profiles.

If your tax affairs align with the groups that the algorithms determine are at high risk for non-compliance, chances are you will come under further scrutiny.

Kieswetter said that through risk profiling, SARS selects around 10% of cases for further audits.

For typical taxpayers, about 92% of tax returns aren’t touched and are handled by automated processes, he said. Of the remaining 8%, which draw alerts for further scrutiny, 70% will be reviewed, and 30% will require further action by SARS.

The vast majority of taxpayers – who Kieswtter said are “standard earners” – are not under any scrutiny by SARS at all.