The South African Revenue Service (Sars) has apologised after it issued a threatening message earlier this week warning taxpayers that they would be penalised and criminally prosecuted if their tax status was deemed to be non-compliant.
The offending message was issued as a general warning via SMS on 24 October, which cautioned that failure to submit a tax return was a criminal offence and that if returns were not submitted within 10 days of receiving the message, it would result in the initiation of a "criminal process". The message also warned that offenders would be issued with a "notice of intention to summons".
However, on Wednesday, Sars appeared to backtrack from the threatening message, saying it was merely striving to remind taxpayers of their legal obligation to file their returns, as well as the potential consequences for not doing so.
"The SMS message that was sent out earlier this week, in relation to outstanding returns, fell short of the high professional standard we seek to uphold," Sars said in its apology.
"Sars therefore sincerely apologises for the manner in which this matter was handled, the frustration it may have caused honest taxpayers, and any inconvenience caused. Honest taxpayers should not feel threatened by Sars but, unfortunately, the way the message was crafted had this effect."
The Sars threat was issued just one week before Finance Minister Enoch Godongwana is scheduled to deliver his medium-term budget policy statement (MTBPS) in Parliament on 1 November. Godongwana is facing a fiscal crunch thanks to an expected tax revenue shortfall that PwC now estimates will be about R30-billion – though other estimates are as high as R65-billion - in 2023/2024 thanks to softer commodity prices and weak economic growth.
That is expected to push the budget deficit to 5.1% of GDP according to the latest Reuters poll of 13 economists, worse than Treasury’s February prediction of a shortfall of about 4% of GDP. That will force government to increase its borrowing in the capital markets, pushing the country’s debt to GDP ratio to 73.2% of GDP this fiscal year, according to the Reuters poll, higher than the 72.2% forecast in the February budget and well above the 60% level that is considered sustainable for emerging markets.
"The imbalance between fiscal revenues and expenditure, alongside other economic and financial factors, will result in larger borrowing requirements this year than previously thought," PwC wrote in its fiscal perspectives report on Thursday ahead of the MTBPS.
Investec economist Annabel Bishop wrote in her MTBPS preview earlier this month that revenue collection was proving subdued.
"South Africa will need to see a curb on expenditure and higher revenues for the rest of the 2023/24 fiscal year to achieve its fiscal estimates."
While Sars is pulling out all the stops to bolster its revenue collection efforts the tax authority said it does not typically commence legal action against taxpayers before engaging with them first.
"Unfortunately, Sars’ reminders are ignored by some taxpayers, which means that their situation escalates to levels where legal action may be required," Sars said. "Even then, they are reminded about their obligation to file the outstanding returns."
Sars said it had in the meantime put its threatening SMSes on hold, but warned that taxpayers who continue to ignore reminders to comply with their tax obligations would eventually have to answer for their continued non-compliance.
"Sars appreciates the effort of honest taxpayers who diligently comply and fulfil their obligations," the revenue authority said. "We value your valuable contribution to the important work incumbent on us."