Sars commissioner Edward Kieswetter has recommended the creation of a presidency-led national illicit economic disruption programme to crack down on the illicit economy which he estimates could be valued at anything between R800bn and R1,2-trillion.
This is one recommendation of a five-point plan that Kieswetter has proposed to deal with the illicit economy which has undermined the tobacco and alcohol industries in particular, and led directly to the announced closure by British American Tobacco (BAT) of its sole manufacturing plant in South Africa.
Ilicit cigarettes are estimated to make up 75% of the local market.
The plan has been discussed with finance minister Enoch Godongwana and would hopefully begin to be implemented in the new financial year, Kieswetter said in reply to questions by MPs during an engagement on Friday between members of parliament’s two finance and two appropriations committees and Godongwana and Treasury officials on the 2026 budget.
The commissioner noted that the advantage of a presidency-led programme was that the president could hold ministers accountable.
Kieswetter estimated that in the past 15 to 20 years the illicit economy had grown faster than the formal economy, from about 5% of GDP to about 12%-15%. This translated into R200bn-R300bn in taxes not collected.
“So there is a strong business case to do better,” he said.
Another element of the plan was the strengthening of inter-agency collaboration through the establishment of a command centre and collaboration platform with the initial target being high risk value chains in the tobacco, alcohol and fuel industries.
A further recommendation by Kieswetter was that dedicated prosecution teams and courts be set up as many of Sars’ seizures got caught up in a lengthy processes which created uncertainty and led to challenges.
The commissioner also recommended that the experience of Sars be leveraged for a massive scaling up of investment in technology, data science and AI so that the government — and particularly the justice and security cluster — could move towards a far more data driven, evidence-based approach.
A further recommendation concerned what Kieswetter said was a major problem, namely the lack of integration of efforts with each department pursuing their own narrow mandate, often with perverse incentives. There was no national dashboard which could measure progress being made in combating crime, corruption and the illicit economy.
The way capital budgets were allocated should also change. Instead of being allocated to different departments which did different things and did not address the problem systemically, they should be allocated to specific projects.
“It is going to require a fundamentally different approach to how we organise ourselves and a fundamentally different approach to how resources are allocated,” he said.
On outstanding debt owed to Sars, Kieswetter said the debt book over the past year had grown by 26% year on year but the complexity of the debt had changed. The growth in business-as-usual debt had slowed down from R67bn at this time last year to R63bn.
It is going to require a fundamentally different approach to how we organise ourselves and a fundamentally different approach to how resources are allocated
— Edward Kieswetter, Sars commissioner
Sars currently estimated the tax gap — the amount of tax owed — at R500bn, about R200bn of which was for VAT, about R120bn for personal income tax and the remainder made up of other taxes. More forensic investigators and analysts were needed to probe syndicated crime and there was a need to invest more in data science.
Kieswetter was adamant that Sars would not be able to reduce this gap significantly without additional funds as it was “structurally underfunded”.
Deputy commissioner Johnstone Makhubu said Sars was working with Treasury officials on a way to prohibit companies that had outstanding Sars debt from doing business with the state.
Several MPs expressed concern over the relatively small allocation made to local government in terms of the division of revenue — it gets about 10% of nationally raised revenue — which limited the ability of municipalities to deliver services.
Treasury deputy director-general for intergovernmental relations Ogalaletseng Gaarekwe replied that Treasury was working on a funding model for local government with feedback being provided by Godongwana when he tables the medium-term budget policy statement later this year.
Deputy director-general for tax and financial sector policy Chris Axelson said Treasury would consider increasing the R500,000 lifetime limit for tax-free savings in future budgets. The 2026 budget increased the annual contribution to tax-free savings from R36,000 to R46,000 and Axelson said that if the maximum amount had been paid in since the inception of the scheme and included the upcoming R46,000 in the 2026/27 tax year, a total of R421,000 would have been paid. So the limit had not yet been reached.
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