Makwakwa is gone, Moyane should follow

Please find attached soundbite by the DA Shadow Deputy Minister of Finance, Alf Lees MP, in English.
The DA welcomes the resignation of the Chief Officer of Business and Individual Taxes, Jonas Makwakwa, from the South African Revenue Service (SARS) today. This is a step in the right direction.
However, SARS Commissioner, Tom Moyane, still remains despite doing everything in his power to protect Makwakwa, even to the point of possibly misleading Parliament.
Makwakwa is a deeply compromised individual and SARS will be better without him. The Financial Intelligence Centre (FIC) found that suspicious amounts of money had ended up in Makwakwa and his girlfriend, Kelly-Ann Elskie’s bank accounts.
The investigation into these suspicious transactions as well as his conduct at SARS must continue and should be extended the role played by Moyane in ensuring Makwakwa retained his position at SARS.

Budget 2018: Gigaba can avoid tax increases and make R112 billion available

The following was presented today by the DA Leader, Mmusi Maimane MP, and DA Shadow Deputy Minister of Finance, Alf Lees MP, ahead of the Main Budget 2018, tomorrow. Please find the Main Budget Preview here.
Introduction
The fact is that no government can tax itself to prosperity. Tomorrow, Finance Minister, Malusi Gigaba, will deliver the 2018 National Budget Speech, effectively detailing the blueprint as to how President Cyril Ramaphosa’s “new dawn” will take effect.
As with the President’s maiden State of the Nation Address (SONA) last week, we join South Africans who are optimistic about the potential change in direction national government will take under its new President. The budget provides the first real opportunity to demonstrate such change.
As a result of a near decade of mismanagement of the country and the economy under Jacob Zuma, our nation finds itself in a very precarious financial situation. With almost 10 million unemployed South Africans – most of which are young people – and over half the nation living in poverty, it cannot and mustn’t be “business as usual” in this budget.
A “new dawn” requires a “new direction” in the economy. In our view, this means there needs to be total change to policy direction and spending patterns in order to (a) grow our economy at a rapid rate that will create jobs and bring in new tax revenue, and (b) introduce big, deep, and lasting spending cuts to all the waste and excess in government. This will ensure that we can direct public funds to deliver basic services and support to the poor, and means that we don’t need to hurt the poor through more tax.
The budget will no doubt have implications for the most vulnerable in our nation. With inflation on the rise, and the cost of living increasing, we are faced with tough choices, and these tough choices must favour the poor and the jobless. We cannot attempt to balance the budget on the backs of the poor.
We have identified a “six pack” of challenges, which must be addressed in tomorrow’s budget. These include a broken budget process, weak economic growth, ballooning national debt, dysfunctional institutions, zombie state-owned enterprises and long-term fiscal risks.
We need to cut spending and expenditure in the right areas. The cuts ought to focus on superfluous government departments, zombie SOEs, and vanity projects such as the New Development Bank. If the budget does this, we will support it. However, if the budget cuts basic services such as health, education, social grants and infrastructure that facilities growth – we will reject it.
The budget must also carefully consider funding of pro-poor and opportunity creating items such as funding of higher education, and the internship programmes for young people announced in the SONA last week.
At present, we sit with massive revenue shortfalls projected over the medium term, including R50.8 billion this year, R69.3 billion next year, and R89.4 billion in the 2019/20 financial year. If we address the “six pack” of challenges in tomorrow’s budget, there will be no need for government to raid the pockets of citizens, whether by a regressive anti-poor VAT increase, or a further increase in personal income tax.
Therefore, any tax increase tomorrow will be rejected by the DA, including the likely removal of zero rating on fuel. We specifically reject any talk of a VAT increase, which will hit the poorest hardest.
Budget 2018
What the Minister last year called an “honest view” of the state of the economy, revealed weak economic growth, a breach of the expenditure ceiling, bailouts of zombie state-owned enterprises, forced selling of non-core state assets, a blow-out in the budget deficit and ballooning national debt.
The Minister’s “decision not to make any decisions” was a disaster, causing the major rating agencies to snap.
In tomorrow’s Budget the Minister will have to tackle a “six pack” of challenges as follows:

  • a broken budget process;
  • weak economic growth;
  • a budget blowout;
  • state capture;
  • “zombie” state-owned enterprises; and
  • long-term fiscal risks
  1. Broken budget process:

The budget process is supposed to promote transparency, accountability and effective financial management.
However, the budget process is broken with:

  • decision-making on budget priorities being centralised under the Minister of Planning, Monitoring and Evaluation, Jeff Radebe, who is now responsible for producing a “Mandate Paper”, setting out long-term budget priorities in terms of a new budget prioritisation framework; and
  • decision-making on resolving competing budget priorities being centralised in a new “pop-up shop” called the Presidential Fiscal Committee.

We need to restore the integrity of the budget process and ensure that it is geared towards promoting transparency, accountability and effective financial management by restoring control of the budget process to National Treasury.

  1. Economic Growth

The average economic growth rate over the medium term is expected to be about 1.6%, which is well below the 3% required to begin increasing employment, decreasing poverty and stabilising national debt.
To boost economic growth and create jobs requires a fundamental change in economic policy in South Africa.
What we need is a “policy shock” to boost economic growth and create jobs in our country.
That is why we believe the Minister should announce a package of structural reforms designed to boost investor confidence, and consumer confidence, and therefore private sector investment, including:

  • withdrawing the current version of the Mining Charter and the Mineral and Petroleum Resources Development Amendment Bill;
  • exempting small businesses employing fewer than 250 employees from complying with restrictive labour legislation, other than the basic conditions of employment;
  • removing the extension of collective bargaining agreements to non-parties, who cannot carry the cost of wage agreements imposed on them;
  • auctioning off the high-demand spectrum and using the proceeds to facilitate access to mobile internet and roll out fibre fixed-lines to support competitive technologies; and
  • privatise, or part-privatise, “zombie state-owned enterprises such as South African Airways and Eskom.
  1. Budget Blowout

MTBPS revealed a budget deficit of R193.1 billion in the 2018/19 financial year, and ballooning national debt over the medium term, blowing out to a staggering R3.4 trillion, or 59.7% of GDP, by 2020/21.
To stabilise national debt will require “fiscal effort” in the amount of at least R39 billion, or 0.8% of GDP, in 2018/19.
This excludes the level of additional “fiscal effort” that may be required to fund free higher education, the public-sector wage bill, and further “bailouts” to “zombie” state-owned enterprises in South Africa.
We expect the Minister to try to solve the “fiscal equation” on the revenue side, rather than the expenditure side, and to announce significant tax increases in 2018/19. The possibility of a 2% increase in VAT will be disastrous for the poor who will be hit hardest should this increase be implemented.
So, whether you are rich, and taxed directly, or poor, and taxed indirectly, the Minister is going to reach into your back pocket and help himself to more of your money in 2018/19.
However, there options other than tax increases.
These include:

  • reducing the size of the cabinet by at least five ministries, which could save an estimated 122 million in 2018/19;
  • the implementation of a 6% per year “haircut” on all mandatory cost containment items in national government, which would save an estimated R2.3 billion in 2018/19; and
  • the implementation of a 6% per year “haircut” on all mandatory cost containment items in provincial government, which would save an estimated R3 billion in 2018/19.

However, if we are going to get serious about cutting spending we will have to confront the ballooning cost of “compensation of employees”, which is projected to be R587 billion in 2018/19.
We believe the Minister should consider implementing a “wage freeze”, for the period of one year, across the public service, including salary freezes for:

  • public service office bearers, which would save an estimated R547 million in 2018/19;
  • performance bonuses in general government, which would save an estimated R2.2 billion in 2018/19;
  • salaries of all employees in local government, which could save an estimated R4.4 billion in 2018/19; and
  • salaries of all employees in general government, which could save an estimated R54.9 billion in 2018/19.

However, in addition to austerity measures, we believe the Minister should implement a comprehensive spending review, aimed at identifying sustainable savings, over the medium term, between 2018/19 and 2020/21, including:

  • reducing the size of the executive, to about 15 ministries, which could save R13.8 billion over the medium term;
  • reducing the number of foreign missions by 69, which could save an estimated R3.9 billion over the medium term;
  • running the provincial legislatures more efficiently, which could save an estimated R R5.8 billion over the medium term; and
  • withdrawing from the New Development Bank, which would save an estimated R17.2 billion over the medium term.

A comprehensive spending review would also be geared towards selling off state assets, including:

  • selling assets by privatising, or part-privatising, some of the 223 “public entities”. After It should be noted that many of these entities run at massive losses;
  • selling, or leasing, “underutilised land parcels”, not well located for housing development, valued at about R12.6 billion, and which cost about R42 million in rates, taxes and maintenance in 2016/17; and
  • selling government’s remaining shares in Telkom, which would raise an estimated R7 billion in 2018/19.

The savings identified as a result of a comprehensive spending review should be allocated:

  • to fund investment in infrastructure and skills development to support economic growth; and
  • to cut the fiscal deficit in order to reduce national debt and debt service costs over the medium term between 2018/19 and 2020/21.
  1. State Capture

We need to act decisively to restore public trust in the South African Revenue Service by:

  • firing the Commissioner of the South African Revenue Service, Tom Moyane, and appointing an Acting Commissioner of the South African Revenue Service, in terms Section 7 of the South African Revenue Service Act (No. 34 of 1997);
  • implementing the recommendations on tax administration made by the Davis Tax Committee; and
  • scrapping the proposed Commission of Inquiry into the South African Revenue Service announced by the Minister on 07 November 2017.
  1. “Zombie” State-Owned Enterprises

The fact is that Eskom is “too big to fail” and a default on its R347 billion debt mountain, much of which is backed up by government guarantees, would be a systemic risk to South Africa.
We believe the Minister must act to reduce the “systemic risk” of “zombie” state-owned enterprise, Eskom, by:

  • providing a further R20 billion “bailout” to deal with the “liquidity crisis”;
  • unbundling the utility and ensuring that assets, such as power stations, are privatized; and
  • making it clear that the R350 billion government guarantee currently in place is a hard ceiling at Eskom.

What we do not need is a “fake privatisation” that puts pensioners savings at risk at Eskom.
We expect the “liquidity crisis” at Eskom to draw most of the “oxygen” when it comes to “zombie” state-owned enterprises, but there are others, including Denel (R3 billion), South African Airways (R4.8 billion) and the South African Broadcasting Corporation (R3 billion), that may require some sort of financial support between 2018/19 and 2020/21.

  1. Long-term Fiscal Risks

During the MTBPS, the Minister reiterated the view that:
With regard to nuclear energy, we reiterate that the programme will be implemented at a pace and scale that the country can afford.”
And President Cyril Ramaphosa did not mention a word about the proposed nuclear build programme during his State of the Nation Address on 16 February 2018 in Parliament.
There is still lingering uncertainty about whether the proposed nuclear build programme will be implemented in South Africa. However, the reality is that there is no pace or scale at which the country can afford this programme.
That is why we believe the Minister should, once and for all, announce the termination of the nuclear build programme in South Africa.
Conclusion
We believe that the minister could deal decisively with the “six pack” of challenges during the main budget by:

  • restoring the integrity of the budget process by announcing the return of control of the budget process to National Treasury;
  • boosting economic growth by announcing a package of structural reforms to build investor confidence and stimulate private sector investment;
  • stabilising public finances by announcing a package of austerity measures and a comprehensive spending review;
  • restoring the integrity of institutions in the “finance family” by firing South African Revenue Service Commissioner Tom Moyane;
  • reforming “zombie” state-owned enterprises by privatising, or part privatising, Eskom; and
  • mitigating long-term fiscal risks by terminating the nuclear build programme.

We believe this would go a long way to giving hope to the 9.2 million people who do not have jobs or have given up looking for jobs, in South Africa.
It is now time for this government, and its new President, to show that they are truly committed to total change that will fix our national debt problem, create new jobs through a growing economy, and alleviate the stranglehold of high taxes faced by all South Africans – but disproportionately affecting the poor and jobless.
Tomorrow’s budget is the first real test for Mr Ramaphosa and his government. It cannot be “business as usual”. It must be a budget of touch, bold choices that favour the poor and the jobless.

R13 billion has been wasted on an airline that we do not need

The following speech was delivered by the DA Shadow Deputy Minister of Finance, Alf Lees MP, during the debate on the 2017 Revised Fiscal Framework in the National Assembly today.
Madam Speaker,
The Revised 2017 Fiscal Framework indicates that the Expenditure Ceiling is going to be exceeded by R3.9 billion. This breach was completely avoidable had remedial action been taken to stop political interference and had competent people been appointed to the board at SAA.
As far back as September 2016, when South African Airways (SAA) should have been placed in business rescue, the ANC chose to give it a R4.8 billion guarantee lifeline.
In order to prevent Standard Chartered Bank from calling in the government guarantee at the end of June 2017, the Minister of Finance invoked section 16 of the Public Finance Management Act (PFMA) to make an emergency payment of R2.2 billion to SAA.
For the 2017/18 financial year to July of this year, SAA ran at massive losses of R293.8 million per month and had no prospect of paying the loans of R6.8 billion due at the end of September 2017.
Domestic lenders were persuaded to roll over their loans on condition that certain conditions such as the removal of Dudu Myeni from the SAA board were met.
Citibank refused to roll over their loan and demanded payment.
In order to enable SAA to pay Citibank R1.8 billion, pay arrear suppliers of nearly R1.0 billion and to have some working capital available, the Minister of Finance once again invoked section 16 of the PFMA and made a R3.0 billion payment to SAA.
This brought the direct cash bailouts to SAA in 2017 to R5.2 billion.
A further R4.8 billion is now budgeted for SAA to fund ongoing losses.
Once this appropriation is approved it will bring the total cash bailouts to SAA in the current year to R10.0 billion.
It is these R10.0 billion of bailouts to SAA that have caused the Expenditure Ceiling to be breached.
Unfortunately, despite the appointment of a CEO and the board restructuring, the losses will continue with the Minister of Finance budgeting, rather optimistically, for a further R3.0 billion bailout to SAA in the 2018/19 year.
The R13.0 billion rand could have provided:
• 100 000 Reconstruction and Development Programme houses; and
• 162 000 National Student Financial Aid Scheme bursaries.
Instead, the money has been wasted on an airline we don’t need.

Malusi Gigaba must use his “maiden” medium-term budget policy statement to give hope to the 9.3 million people who do not have jobs in SA

David Maynier MP, DA Shadow Minister of Finance, and Alf Lees MP, DA Shadow Deputy Minister of Finance, preview of the Medium-Term Budget Policy Statement 2017 can be found here.
The Minister of Finance, Malusi Gigaba, delivers his “maiden” medium-term budget policy statement on Wednesday 25 October 2017 in Parliament.
The medium-term budget policy statement is normally an opportunity for the minister to make adjustments to the main budget requiring the approval of Parliament.
However, we believe the minister should use the medium-term budget policy statement to deal decisively with the “big five” challenges to reversing the economic decline as follows:
boosting economic growth by announcing a package of structural reforms to build business confidence and stimulate private sector investment;
stabilizing public finances by announcing a “haircut” on all mandatory cost containment items and implementing a Comprehensive Spending Review;
supporting the independence of financial institutions by making a strong statement in support of the institutional independence of the South African Reserve Bank, Public Investment Corporation and National Treasury;
reforming “zombie state-owned enterprises by putting the national airline into business rescue with a view to stabilizing and then privatizing South African Airways; and
mitigating significant long-term fiscal risks by terminating the nuclear build programme.
What will define the success, or the failure, of the minister’s “maiden” medium-term budget policy statement will, in the end, be whether he can give hope to the 9.3 million people who do not have jobs, or have given up looking for jobs, in South Africa.

SAA must be Stabilised, Professionalised and Sold Off

The crisis at South African Airways (SAA) is fast reaching boiling point with debt repayments totaling R6.9 billion due this Saturday, 30 September. Despite this urgent situation, National Treasury has yet to reveal where this enormous amount of money will come from.
Our national carrier has become a bottomless pit into which government continues to pour precious public resources that should be spent on lifting 30 million South Africans out of poverty. It is hard to believe that any government hoping to be re-elected would take money from the poor to subsidize travel for the rich.
SAA’s fortunes will not change if we continue done the current tried, tested and failed path. For almost two decades, the airline has relied on government bailouts and guarantees for its survival. The cumulative total of bailouts since 1999 is R14.4 billion, and National Treasury is currently trying to source another R10 billion for the airline in the next 48 hours. Government has already extended R19.1 billion in guarantees – meaning that nearly R35 billion of ordinary South Africans’ hard-earned money has been dedicated to keeping SAA in ‘business’.
In addition to these bailouts and guarantees, and under the control of Board Chairperson Dudu Myeni, SAA has made a cumulative loss of R15.7 billion over the past five years. The DA has been clear and unwavering in our contention that Ms Myeni is both unfit and unsuitable to be at the helm. It is clear for all to see that this government continues to retain and protect Myeni in her position, in spite of this cash hemorrhage, because of her close political affiliations, including President Zuma himself.
The R10 billion that government is saying SAA needs will only pay off the bank loans of R 6.9 billion due by the 30th of September, the Standard Charted bail out of R2.2 billion at the end of June 2017, and R750 million to pay suppliers who were not fully paid in July and August 2017. The R10 billion will not provide working capital to fund the losses that National Treasury and the latest turn-around plan indicate will continue for the next two years. This requires a further R13 billion in cash injections or what National Treasury euphemistically refer to as “re-capitalization”.
The reality is that SAA is insolvent and bankrupt. It must be stabilized, and sold off as soon as practically possible.
Recovery plans have followed turnaround strategies, all yielding further losses. It is clear that national government is hell-bent on hanging onto the beleaguered airline – no matter the cost to the country and its people. SAA is not a strategic state-owned asset and it plays no role in the developmental agenda of government. On the contrary, over the last two decades it has cost our country dearly and delivered no tangible benefits to ordinary South Africans.
Getting to the bottom of the problem
Despite Finance Minister Malusi Gigaba’s best efforts, rumours of an impending raid on the Public Investment Corporation (PIC) refuse to go away. With just 48 hours to go before the R6.9 billion is due, we still do not know how Minister Gigaba intends to fund the bailout, and where additional funds will be found to pay suppliers.
The PIC, which administers the pensions of teachers, nurses, police officers and other public servants, has confirmed that they were approached for a R6 billion bailout for SAA. That our government would even consider risking pension funds of public servants is deplorable.
Significantly, the PIC has serious reservations about SAA’s suitability for a loan. At the media briefing on the 26th of September, PIC CEO, Dan Matjila, revealed that a due diligence investigation had been conducted into SAA. This report found SAA to be below the minimum investment standards required by the PIC. Matjila conceded that the outcome was “not favourable” in terms of “the minimum requirements of our client mandate”.
The contents of this report may be the clearest indication yet of the true state of SAA and the DA believes the report should be released for public scrutiny. We will therefore be submitting an application in terms of the Promotion of Access to information Act (PAIA) to obtain a copy of the SAA due diligence report conducted by the PIC.
Holding Myeni and Gigaba accountable
The Constitution sets out the basic values and principles of public administration in Section 195, which states that:
Public Administration must be governed by the democratic values and principles enshrined in the Constitution, including … [e]fficient, economic and effective use of resources … The above principles apply to … Public Enterprises.”
The national carrier is deemed a public entity in terms of Schedule 2 of the Public Finance Management Act (No. 1 of 1999) and in terms of the South African Airways Act (No. 5 of 2007). Accordingly, SAA is subject to this section.
Sadly, the management of SAA has become the very antithesis of the requirements set out in the Constitution. It is our belief that Malusi Gigaba and Dudu Myeni, in their respective official capacities, have breached Section 195 of the Constitution by not acting in accordance the principals established therein.
Therefore, the DA will be writing to the Public Protector, Adv. Busisiwe Mkhwebane, requesting an investigation into this matter. Specifically, the Public Protector must investigate the role played by Ms Myeni in the institutional decay and poor governance of SAA, since 2009, and Mr Gigaba in his former and current role as minister of Public Enterprises and Finance, respectively. Myeni and Gigaba’s careers are intimately entwined with SAA’s demise and they must not be allowed to escape accountability.
The way forward for SAA
SAA can be profitable and a company worthy of being called South African. However, immediate and urgent action is required.
The DA’s solution to the SAA crisis would consist of the following interventions:

  • Remove Dudu Myeni from the board entirely and ensure that the board is made up of independent individuals with suitable aviation and business experience;
  • Initiate business rescue proceedings for SAA in terms of Chapter 6 of the Companies Act (No. 71 of 2008). This will temporarily place SAA in the hands of a capable business rescue practitioner charged with returning the entity to a healthy financial position. This will have to include:
    • The removal of political interference both in strategy and in the employment of skilled and experienced management and staff;
    • Aggressively pursuing profitable routes, some of which were foolishly abandoned over recent years;
    • Renegotiating supply contracts, particularly major supplies such as jet fuel on the basis of best price for the required service quality;
    • Adjustments to employee compliment numbers to bring the airline in line with international staffing norms.
  • Release government’s stranglehold over SAA by finding a buyer for SAA immediately. This ought to include an employee share scheme, making a portion of shares available to SAA employees in order to empower them and give them a real stake in the company’s future successes.

These initiatives will not only bring much needed public accountability to the airline’s governance, but will go a long way to making SAA profitable again. We thus call on Minister Gigaba to place SAA under business rescue before the next bailout payment deadline of 30 September.
Conclusion
South Africans cannot continue to fund a defunct and failing national carrier. In truth, the imminent R10 billion bailout will only be a short term solution and will not fix the underlying issues at SAA. It is time for urgent and immediate interventions that seek to stabilize, professionalize and sell off SAA.

DA will hold Buthelezi to release SAA investigation reports

For six months the DA has been pursuing all possible avenues to ensure that a raft of forensic investigation reports into SAA are tabled in Parliament. Today’s Sunday Independent story detailing how senior SAA executives ignored a tender scandal report makes the continued refusal to reveal these reports even more suspicious.
Last week, the Deputy Finance Minister, Sfiso Buthelezi, committed to provide copies to the Portfolio Committee on Finance and the DA will hold him to his commitment.
These reports were promised to the finance committee by the previous Deputy Finance Minister, Mcebisi Jonas, more than 6 months ago, but despite reminders and PAIA applications, and stalling for time, none have been delivered.
It is crucial for the credibility of the new board that the skeletons of the past are exposed and dealt with. One being the Airbus deal debacle that cost the previous Minister of Finance, Nhlanhla Nene, his job when he refused to fall in line with Dudu Myeni’s wishes.
The initial refusal to make the reports available still raises suspicions and was a direct reneging on a firm commitment given by the Deputy Minister of Finance to Parliament. This also left a distinct impression that it was an attempt to cover up information.
The thought is appalling, especially considering SAA’s tainted record of dubious deals and wasteful management of public money, ultimately the money of South African people, with the most recent being SAA’s projected loss of R 4.5 billion for 2016.
Whilst the DA looks forward to receiving unabridged copies of all investigation reports without further delay, I will write to the Deputy Finance Minister to obtain his formal commitment to a date to provide the committee with the reports. Considering that some of these reports date back to as far as 2010, there is no reason that the reports should not be provided to the committee by the end of the week.

Show us your Nkandla tax returns, Mr President

In a written response to a DA parliamentary question regarding whether he declared the fringe benefits accrued to him as a result of the State-funded upgrades to his Nkandla homestead, to the South African Revenue Services (SARS), President Jacob Zuma refused to answer.
Zuma, as set out by the Income Tax Act, is liable to pay the estimated R63.9 million in fringe benefits tax on the benefits that accrued to him as a result of the extravagant upgrades to his personal Nkandla homestead.
In his response to the DA, the President answered that “tax is a confidential matter between the South African Revenue Services and the Tax-payer”. Although this is true, all the DA has asked is for him to confirm that he has declared to SARS the fringe benefit that has accrued to him in order to prove that he is indeed a law-abiding citizen.
His refusal is yet another indication of him continuously dodging accountability.
The ANC-government has become synonymous with corruption, and the President and his cronies are unashamed in the looting of the public coffers. This, when 8.9 million unemployed South Africans struggle to feed their families.
The DA will not stand for this, and we will continue to hold those in leadership accountable.
A government must deliver services to the people, not steal from them.

SAA losses climb higher to R4.5 billion for 2016/17

The latest information provided to the Standing Committee on Finance (SCOF) by the South African Airways (SAA) board reveals a staggering loss of R4.5 billion for 2016/17.
This new figure of R4.5 billion is significantly higher than the R3.5 billion revealed ten days ago and the R1.7 billion estimated in September 2016.
This is an increase of R1 billion in the space of ten days and an increase of R2.8 billion in the space of 6 months.
With a full month of figures left to be reported on, this figure of R 4.5 billion could experience yet another significant increase.
The DA will interrogate these volatile numbers fully when SAA appears before the SCOF on Wednesday, 29 March 2017, as it is simply inconceivable that SAA losses have increased by a staggering R1 billion in a matter of weeks.

DA to provide Tax ombud with information about SARS refund delays

The DA has written to the Tax ombud, Judge Bernard Ngoepe, to provide him with information we have received from parliamentary questions about outstanding VAT and diesel refunds.
On 28 February 2017, the total amount of outstanding VAT refunds was R19.6 billion.
This represents a staggering increase of R 1.5 billion from the previous year, or 8% increase in the value of outstanding refunds.
It is shocking that 43 650 or 15% of a total of 343 674 claims submitted were outstanding as on 28 February 2017.
Moreover, of the 43 650 outstanding claims, it is worrying that 42% were outstanding for more than 2 months.
There was also an increase of 42% of refunds being audited.
It is indeed these audits that are at the heart of the problem.
They are either abused to, or unintentionally create, delays in refunds that result in huge cash flow problems and thus economic growth inhibitors.
It is astounding that there are VAT refunds that are 10 to 12 months overdue.
The impact on the businesses involved will have been very serious and there may well be some of the affected businesses that have been forced into liquidation or at very least out of business.
VAT vendors act as collection agents for SARS.
Businesses and small businesses in particular, have used their own cash to pay VAT on their purchases and it is morally wrong for SARS to in any way delay refunding them the very cash that they need to pay wages and to keep the business and jobs going.
It is immoral for VAT audits to be abused to meet SARS revenue income targets and if the Tax Ombud finds evidence of this sort of unethical behaviour the DA will demand that disciplinary action be taken against both those who made such policy decisions as well as those who participated in the implementation of them.
The DA is concerned that the R19.6 billion in outstanding claims could place serious strain on the national cash balances.
These cash balances, according to the provisional financing figures published by National Treasury, amounted to R210.77 billion.
This means that about 10% of the cash on hand would need to be used to refund the full amount of outstanding VAT refunds which would place the cash balances, over and above the normal monthly expenditure of the government, under severe pressure.
In addition to the referral of tax data to the Tax Ombud, the DA will take the following action to ensure that action is taken to resolve the delays in VAT refunds and thus the negative impact on economic growth and job creation:
• We will probe the SARS delegation robustly during the SARS appearance before the Standing Committee on Finance on the 28th of March 2017;
• We will submit a written question to the Minister of Finance to establish what the impact on the countries cash resources and ability to pay State employee salaries, expenses and capital infrastructure costs would be should the full backlog of VAT refunds have to be paid out.
Earlier this week, we welcomed the announcement by Judge Ngoepe that he will investigate the failures at the South African Revenue Services (SARS) that cause these reported delays in tax refunds.
However, it is imperative that the R19.6 billion be refunded and the DA questions whether SARS is currently in a position to do so.
The DA continues to urge Judge Ngoepe to efficiently and effectively investigate the failures at SARS so that they can resolve what is clearly a serious problem for business, economic growth and job creation.