Sars Commissioner Edward Kieswetter addressed G20 delegates and called for improved tax collection methods.
Image: Timothy Bernard / Independent Newspapers
The South African Revenue Service (Sars) Commissioner Edward Kieswetter told G20 delegates and finance ministers that for emerging countries to become successful they need to strengthen their ability to collect tax rather than hiking taxes on their citizens.
The Commissioner made these comments during a panel discussion at the G20 Finance Track side event on Wednesday in Cape Town.
The event hosted central bank governors and finance ministers from the largest economies in the world.
Some of the delegates include:
The Sars commissioner said that he was concerned about countries raising taxes and he instead said that states need to invest in better revenue collection methods.
"In terms of raising taxes, we understand and accept it will always be a consideration for ministers of finance, but it's not a free call,” he said.
"Every time, there are consequences. So, removing money from the economy means we may stifle growth in economic development and also growth in the tax base, which ultimately is the goose that provides the eggs," Kieswetter added.
He noted that raising taxes would require improved compliance measures, which is challenging due to the narrow tax base and administrative inefficiencies.
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The commissioner explained that taxes must be viewed as equitable and efficiently allocated, as perceptions of unfairness or wasteful spending can erode taxpayer trust, compliance, and revenue.
The IMF managing director, Kristalina Georgieva said that it was important for citizens to see their taxes are being used in a good and effective way.
"The public would be more supportive to pay taxes if they see that their money is wisely used. I have never heard people say, 'Please give me more taxes to pay,'" she added.
Georgieva called for states to find innovative ways to collect revenue rather than raising taxes.
She suggested curtailing tax exemptions, deductions or credits which could raise revenue by an extra 2% to 4% of GDP in developing countries.
"Very often these exemptions and tax credits are going to those who actually need it," she explained.
Lastly, Georgieva said that states need to also focus on developing pro-growth tax systems, and with more economic growth, these states can collect more tax revenue.
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