Billions in budget deficits force SARS to abandon wage deal

The SA Revenue Service is appealing the North Gauteng High Court judgment forcing it to increase its employees’ salaries by a further 2.3% after initially withdrawing its application for leave to appeal. Picture: Ziphozonke Lushaba/Independent Newspapers

The SA Revenue Service is appealing the North Gauteng High Court judgment forcing it to increase its employees’ salaries by a further 2.3% after initially withdrawing its application for leave to appeal. Picture: Ziphozonke Lushaba/Independent Newspapers

Published Mar 10, 2024


SA Revenue Service (Sars) commissioner Edward Kieswetter told unions representing its employees that the taxman’s funding deficits between R2.35 billion and R3.5bn over a three-year period forced him not to fully increase salaries by 6.2%.

This has emerged in papers filed at the North Gauteng High Court after Sars made a U-turn on its earlier decision to withdraw its appeal of Judge Elizabeth Kubushi’s ruling forcing the tax revenue collector to honour a salary agreement to increase implement the last leg of the three-year wage agreement signed in April 2019.

”The commissioner indicated that paying a lower once-off gratuity and a once-off allocation to the employees’ pension could be funded from the savings of the current year’s (2023/24) budget.

He indicated that the requisite funds are not available to fund full implementation of the wage agreement. He stated that Sars has a funding deficit ranging between R2.355bn for the 2022/23 financial year to R3.537bn for the 2024/25 financial year,” explained Sars’ head of employee relations and labour Sobantu Ndlangalavu in the taxman’s now reinstated application for leave to appeal Judge Kubushi’s judgment.

Ndlangalavu said engagements with the Public Servants Association (PSA) and the National Education, Health and Allied Workers’ Union (Nehawu) were started in an attempt to reach a settlement agreement with both unions.

On behalf of Sars and Kieswetter, Ndlangalavu added that his boss told the PSA and Nehawu that should the ruling not be appealed the tax revenue collection agency either had to find an amicable settlement with the unions, find ways to restructure and reduce its costs base in order to fund the third year of the wage agreement.

Sars, which had initially pleaded poverty, told the court it would have been able to pay a reduced increase due to savings it had effected, among the options it placed on the negotiations table.

In addition, Ndlangalavu accused the PSA of not presenting the six options offered by Sars to its members but instead requesting a mandate to withdraw from the settlement discussions and to enforce Judge Kubushi’s ruling.

In November 2021, according to Ndlangalavu, Nehawu accepted a partly implemented increase of 3.9% instead of the expected 6.2% as per the wage agreement and judgment and this was been applicable to PSA members.

The six settlement options offered by Sars ranged from implementing the remaining 2.3% but this needed the National Treasury and Parliament’s approval and would only be possible in the 2025/26 financial year while others would be subject to costs savings, freezing of hiring as well as reducing the number of staff.

Sars maintains that it only reinstated its application for leave to appeal after the settlement talks broke down and launched it at the earliest available opportunity and accused the PSA of scuppering the settlement opportunity.

”In order to facilitate these settlement discussions, as a measure of good faith and to build trust, the applicants (Sars and Kieswetter) withdrew the notice of application for leave to appeal on December 13, 2023,” Ndlangalavu explained.

He said Kieswetter implored the PSA and Nehawu ‘to build something special’ at Sars and the country, as well as showcase that the taxman’s management and unions can work together.

”.. It was always understood and accepted by all that the applicants (Sars and Kieswetter) kept open the option of an application for leave to appeal should the settlement negotiations fail. It was understood by all that the applicants did not pre-empt (quash) their right to appeal,” added Ndlangalavu.

Sars also complained that its annual budget runs into billions of rands and the three-year wage increase agreement exceeded R1bn.

”It would lead to absurd results if financial accountability means that a loan or security of R1 million requires ministerial approval but a multi-year agreement implicating billions of rands, and which constrains the third respondent (Finance Minister Enoch Godongwana’s) powers to appropriately budget for expenses, does not,” explained Ndlangalavu.

According to Sars, a million-rand loan agreement requiring ministerial approval is far less of a burden on the burden of exercise of the accounting officer’s (Kieswetter’s) powers, than a multi-billion rand salary agreement over three years.

”One is dealing with huge amounts of public money, literally more than a billion rand, and the broader public interest plays a significant role. It is in the public interest that the legality of what is at stake, be determined by a higher court,” Ndlangalavu added.

Sars insists that the wage agreement is invalid and unlawful as it is non-compliant with the Public Finance Management Act.

”It is objectively impossible for Sars to pay salary increases in terms of the wage agreement,” the entity further stated.

The PSA indicated that it filed its notice of intention to oppose the matter by the Thursday deadline and now has 15 court days to deliver its answering affidavit.

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