SHARE
Image: Phillip Ingham - https://flic.kr/p/wysZd

While there was an expectation that there would be a revenue shortfall for the 2017 financial year, it is very concerning to note that there was no clear plan on how the R50 billion shortfall would be filled, according to Yugen Pillay, Partner and Regional Lead: Public Sector at Grant Thornton

Commenting on Wednesday’s Medium Term Budget Policy Statement (MTBPS) presented by Malusi Gigaba, minister of finance, Pillay said the minister did confirm that only part of the shortfall will be funded by way of sale of shares in Telkom. “It is even more concerning to note that the country’s contingency reserves would be utilised during this year and for the coming three years.  These funds are generally only utilised when there is no other suitable alternative, which is certainly cause for alarm.”

Malebo Moloto, Tax Technical Advisor the South African Institute of Tax Professionals (Sait) said accounting firms will need to ensure that when assisting their clients they spot any abnormalities in terms of tax returns and ensure clients complete and submit their returns correctly and that taxes are paid over to the receiver.

He says with the slow growth of the economy, the impact may be seen in slow client growth and even difficulties in collecting fees from their clients for services rendered. This may especially impact small accounting practices.

In Malusi’s speech, the minister said “it is important that we continually strengthen tax morality and deal with any underlying causes that may undermine it”. Moloto says this may be a challenge for accounting firms as they may find more and more clients wanting to refrain from paying as they are growing dissatisfied with the state of the country.

Moloto says SARS’ awareness of the major problem of illicit financial flows relates to accounting firm’s clients who may not have declared any foreign income to SARS when the SVDP was still open. This will impact accounting firms who have those clients are the revenue service will be coming after them.

On Gigaba’s statement that country-by-country reporting, which will give SARS insights into risk areas of multi-national enterprises (MNEs), will begin at the end of this year (31 December 2017) with first exchanges to begin next year, Marcus Stelloh, Associate Director: Transfer Pricing at Grant Thornton Johannesburg says this has been a hot topic for multinational enterprises and consultants for a while, because of its far-reaching implications for business.

“Now, government has also acknowledged its importance. SARS may have lost some experienced staff members over the last few years but it has recently recruited a senior member with vast experience in the international tax space, from a consulting firm and this individual is likely to assist with this going forward. CBCR, master file and local file regulations will assist SARS, and tax authorities around the world, with risk profiling of larger MNEs and this is likely to increase scrutiny overall.  In addition, we expect a rise in more targeted questions / audits from SARS.”