On 29 November 2024, a significant milestone was celebrated at the residence of His Excellency Mr. Håkan Juholt, Ambassador of Sweden to the Republic of South Africa. The event marked the culmination of a four-year International Capability Building Programme (ICBP) focused on Voluntary Tax Compliance (VTC), and brought together key stakeholders, including representatives from the Collaborative Africa Budget Reform Initiative (CABRI), the Swedish Tax Agency (STA) and the teams and authorisers who participated in the programme from the National Treasury of South Africa and the South African Revenue Service (SARS).
This gathering was not just a celebration of the programme's achievements but also an opportunity to reflect on the valuable lessons learned and the successes that emerged from this collaborative effort. Below were the main takeaways from the event.
Progress in tackling tax policy and administration challenges goes beyond simple metrics of increased revenue collection
As the programme drew to a close, participants highlighted the meaningful progress that has been achieved and importantly, the longer-term outcomes of the ICBP programme.
Two teams focused on enhancing registration and compliance for Small, Medium, and Micro Enterprises (SMMEs), significantly improving how administrations engage with this segment. They experimented with new language to attract potential unregistered businesses and created welcome packs along with personalized letters for both newly registered and existing SMMEs. The positive outcomes of these efforts prompted SARS’ Customer Experience and Modernization teams to embrace a more amicable approach in taxpayer engagement. Additionally, internal processes were strengthened through collaboration with third parties, including banking institutions, which improved the identification of and outreach to unregistered businesses. A comprehensive cleanup of the register for small business Personal Income Tax (PIT) and Corporate Income Tax (CIT) resulted in the removal of over 600,000 cases, enabling SARS to better monitor active businesses and their compliance levels.
Trader registration and verification also remain a top priority for SARS and the National Treasury (NT). One of the teams implemented various initiatives to enhance their service offerings, including conducting educational needs assessments for registration, licensing, and accreditation. They established improved frameworks and governance for digital content, streamlined the registration and licensing process from 21 steps to just 7, and introduced automated case reporting for traders throughout all registration and licensing stages. Notably, SARS reported an increase of over 20% in customs, duties, and VAT revenues between the 2023/2024 fiscal year and preliminary figures for 2024/2025, despite relying on partial calendar data.
Whether through improved communication strategies, enhanced taxpayer services, or by strengthening internal processes in ways that better respond to taxpayer needs, the results of the ICBP are tangible and promising. Many of the successes demonstrated that even short-term efforts can lead to significant advancements in tax compliance. Importantly, all the teams highlighted that, beyond demonstrated improved metrics in revenue collection, the most valuable learning was the diffusion of a new approach to tackling complex administration and policy problems with a taxpayer-centric perspective within their respective institutions.
Building Trust in Tax Policy and Administration
In a landscape often characterized by scepticism towards government institutions, a voluntary compliance approach that puts the perspectives of taxpayers at the centre, has proven invaluable. By incorporating diverse perspectives and tackling tax compliance issues with an understanding of taxpayer incentives, the programme has paved the way for a more inclusive dialogue around voluntary compliance. Participants noted that such engagement fosters trust, a crucial element in encouraging taxpayers to fulfil their obligations.
A prominent theme throughout the session was the challenge of fostering taxpayer trust, especially in South Africa, where public perceptions of government effectiveness significantly impact compliance rates. Despite these hurdles, a strengthened relationship between SARS and NT can allow both institutions to become well-equipped and efficient. This, in turn, can enhance trust in government institutions overall. Cultivating this perception is essential, as it lays the groundwork for encouraging voluntary compliance, even amid broader political and economic challenges.
The discussions revealed that, while the road ahead is fraught with challenges, there are significant opportunities to enhance voluntary compliance. By focusing on taxpayer engagement and understanding their needs and concerns, SARS can continue to foster a culture of compliance that benefits both the government and the citizens it serves.
Looking Ahead
The conclusion of the ICBP in South Africa signifies the end of an important chapter in the journey toward improved voluntary tax compliance. Yet, it also represents the start of a new phase, where the lessons learned and relationships forged will play a crucial role in shaping the future of tax administration and policy development in the country. Notably, the leaders from both institutions commended the transition to a more innovative approach in addressing intricate tax policy and administration challenges, emphasizing a renewed focus on taxpayers. This commitment is set to be deeply integrated and widely disseminated within both SARS and the NT.