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South Africa to launch inquiry into
tax service following huge shortfall

CAPE TOWN South Africa (Xinhua) -- South African Finance Minister Malusi Gigaga confirmed on Tuesday that a Commission of Inquiry will be established soon to look into the South African Revenue Service (SARS) following a shortfall of billions of rand in tax revenue.

Gigaba said President Jacob Zuma has acceded to his request for an urgent establishment of an inquiry into the tax administration and governance of the SARS.

“The Commission will be established soon and its details will be released in due course,” Gigaba said.

The minister said he has informed SARS Commissioner Tom Moyane of this proposed inquiry and the commissioner has expressed his support for it and willingness to cooperate.

Gigaba announced in the Medium Term Budget Policy Statement last month that South Africa faces a staggering revenue shortfall of 50.8 billion rand (about 3.63 billion U.S. dollars) for the current financial year.

The SARS is blamed for under-collection of revenue.

Factors responsible for the under-collection of revenue by SARS must be investigated, Gigaba said in his Tuesday statement.

The inquiry will also look into what steps need to be taken to improve performance management systems at SARS to improve its capacity to collect revenue, said Gigaba.

Whilst the economic cycle is the most likely and significant factor driving lower revenue-collection, other factors could also be at play, like weakening tax morality and challenges facing tax administration, according to Gigaba.

Whatever the reason for such shortfall, the risk of under-collection of revenue impacts directly on the size of the future budget deficits, and hence on the sustainability of the projected debt-to-GDP trend, and directly on South Africa’s credit rating and growth prospects, Gigaba said.

Gigaba has revealed that the gross national debt will shoot up to 3.4 trillion rand (about 243 billion dollars), or 60 percent of GDP by 2020 as the government is forced to borrow more to fund policy implementation.

Also on Tuesday, the opposition Democratic Alliance (DA) welcomed the proposed inquiry into SARS.

The inquiry should also look into other issues that have plagued the SARS for long, the DA said.

These include the mass exodus of senior and effective employees; reports of unlawful bonuses paid out to SARS executives; undue delays and wrongful obstructions to tax refunds, and factually incorrect communication surrounding people’s tax returns, according to the DA.



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