South African Revenue Service (SARS) Commissioner Edward Kieswetter has reaffirmed his opposition to tax increases, particularly Value Added Tax (VAT) hikes, emphasizing that improving tax collection is a more viable solution to increasing government revenue. Speaking at a G20 side event in Cape Town, Kieswetter stressed that raising taxes would stifle economic growth and place additional strain on South African taxpayers.
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Kieswetter’s Stance on Tax Hikes
During the panel discussion at the G20 finance ministers and central bank governors’ meeting, Kieswetter argued that increasing taxes, particularly VAT, removes money from the economy, weakening business growth and consumer spending. His remarks came just a week after Finance Minister Enoch Godongwana proposed raising VAT by two percentage points in the 2025 budget—a move met with widespread criticism from opposition parties, business leaders, and the public.
Edward Kieswetter’s stance aligns with his long-standing position that higher tax rates do not automatically translate into increased government revenue. Instead, he advocates for better tax administration, enforcement, and closing loopholes that allow tax evasion.
“Raising taxes takes money out of the economy, stifling growth and economic development. It also erodes the tax base, which is the ‘goose that provides the eggs’,” Kieswetter explained.
Tension Between SARS and National Treasury
Kieswetter’s comments have not been well received by Finance Minister Godongwana. Reports indicate that the finance minister was visibly frustrated with the SARS commissioner’s repeated calls for improved tax administration instead of tax hikes.
During a media briefing on February 19, after the budget postponement, Godongwana indirectly responded to Kieswetter’s remarks, emphasizing the need for clear distinctions between tax policy and tax administration.
“It’s quite important that both of us keep to those two lanes,” Godongwana stated, implying that the finance minister is responsible for setting tax policies while SARS should focus on implementing them.
Despite the tension, Kieswetter remains firm in his view that revenue collection should focus on enhancing administrative capacity rather than increasing the tax burden on already struggling South Africans.
The Case for Better Tax Collection
Kieswetter has continuously argued that a well-funded tax administration can significantly improve revenue collection without the need for higher tax rates. He pointed out that underfunding SARS and its operations has limited its ability to collect taxes efficiently.
“There is a nexus between policy and administration. Tax policy is only as good as the ability to administer it. Inadvertently, if you can’t administer a policy, you have a worse impact. This nexus must be considered by policymakers,” Kieswetter said at the G20 event.
His perspective aligns with global best practices, where nations that invest in modernizing tax administration see better compliance and revenue growth.
Digitisation as a Key Solution
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), also participated in the discussion and reinforced Kieswetter’s stance. She highlighted that countries with modern and digital tax systems see higher compliance rates.
IMF research shows that:
- Improving tax administration can increase revenue collection by more than 3% of GDP over five to six years.
- Digitising tax collection can boost revenue by 1% of GDP, provided the reforms are effectively implemented.
Georgieva emphasized that citizens are more willing to comply with tax obligations if they see their money being used efficiently and fairly.
Public Backlash Against the Proposed VAT Increase
The proposed 2% VAT increase has been met with strong opposition from various groups, arguing that it will disproportionately impact low-income earners. Critics argue that, instead of raising VAT, the government should focus on:
- Cracking down on tax evasion.
- Recovering lost revenue from state corruption.
- Strengthening SARS enforcement capabilities.
Many South Africans are already facing financial strain due to inflation, high interest rates, and slow economic growth. A VAT increase would raise the cost of living, making essentials like food and fuel even more expensive.
Conclusion
Commissioner Edward Kieswetter remains firm in his opposition to tax hikes, insisting that South Africa should focus on improving tax collection rather than placing additional burdens on taxpayers. His views have placed him at odds with Finance Minister Enoch Godongwana, who sees tax hikes as a necessary measure.
With South Africa’s economy facing slow growth and high unemployment, the debate over taxation will continue to be a critical issue in government policy. Whether the administration will heed Kieswetter’s advice and invest in better tax collection remains to be seen. However, one thing is clear: increasing taxes without fixing inefficiencies in revenue collection could do more harm than good to the country’s economy.
