From Tax Consulting SA: It has long been on the cards that the South African Revenue Service (Sars) should upgrade their systems and modernise the fact of tax in South Africa. This would enable the easier facilitation of compliance for the country’s growing tax base.
Sars Version 2.0
Earlier this year, SARS Commissioner Edward Kieswetter revealed SARS’ intention of increasing its spend on Information and Communications Technology (ICT) by 2% in the 2021/2022 fiscal year. The aim is to aid in creating the “re-imagined Sars of the future”, which was previously alluded to in the 2021 Budget Speech by the then Finance Minister, Tito Mboweni.
In the months following these statements, Sars demonstrated the need for this technological upgrade when it was unsuccessful in the timeous migration of its systems away from the Adobe Flash Player programme. Sars’ ICT structures came under scrutiny, with the need to align these with international best practices being more prevalent than ever before.
Filling the gaps
From a human capital perspective, Sars’ technological usage, or lack thereof, can be attributed to the shortage of skilled and experienced individuals, due to the mass exodus from the revenue authority to the private sector, or abroad.
This being said, the mass exodus is nothing new, and has been the case for at least the last decade, something which should have been handled by SARS as and when it happened. It is of pivotal importance that this be resolved immediately as noted by Kieswetter in October of 2020 when Sars’ recruitment drive was first brought into the limelight. Kieswetter once again enforced the importance of filling these critical vacancies in mid-2021.
This announcement follows heavy international scrutiny on Sars’ ICT structures, to which Kieswetter responded that Sars’ recruitment drive has a keen focus on areas such as IT and data management, not to mention legal specialist services. Filling these vacancies will not only aid in the upgrading of ICT structures and protocols but will also align with Sars’ vision of artificial intelligence supporting their “strategic intent for voluntary compliance”.
Ghosts of taxes past, present and future
The full implementation of Sars’ action plan is anticipated to take place over the next three years; however, there will still be ramifications for non-compliant taxpayers in the shorter term.
In a recent media release Kieswetter warned taxpayers that, even though SARS is currently under-manned and their ICT is a work-in-progress, the revenue authority still has the capability to detect non-compliance. They can make it costly for taxpayers who chooses not to remedy their compliance status upon it being brough to their attention.
This non-compliance drive means Sars will increasingly focus on tax errors, bringing in the element of negligence to ensure tax dodgers, be it intentionally or negligently, face the correct and proportionate sanctions at the hands of the revenue authority.
Kieswetter has assured the public that this is by no means a free-for-all, but instead an exercise in accountability, through which the revenue authority must still prove wilfulness or intent, beyond a reasonable doubt.
A level of solution-based thinking
Taxpayers wishing to rectify historical non-compliance by means of a voluntary disclosure of information, or ensure their current compliance record remains unblemished, there are various solutions available from a legal standpoint.
The most proactive way to affect this disclosure, is by means of a Voluntary Disclosure Programme (VDP) application. The VDP application allows you to legally declare any undeclared assets, but not be subject to the penalties which would generally stem from such a non-disclosure.
This is the first prize from a compliance perspective and should be considered as a priority for all taxpayers who have not yet received any formal correspondence from Sars, pin-pointing a specific liability owed.
Should the revenue authority discover this non-disclosure prior to the VDP application being submitted, there is still one final Hail-Mary, by means of a Compromise of Tax Debt application (the Compromise).
The Compromise is aimed at aiding taxpayers, both individual and corporate, to reduce their tax liability by means of a Compromise Agreement (“the Agreement”), which is entered into with SARS.
The result of entering into the Agreement, is having your tax liability greatly reduced, to an amount which is affordable to the taxpayer, granting a much-needed reprieve and aiding the taxpayer on the road to recovery.
Once the agreement is duly executed, and payment is made as proposed by the taxpayer, and accepted by Sars’ Compromise Committee, the balance of the liability due to Sars is written-off by the revenue authority.
The first-mover advantage
To protect yourself from Sars, it remains the best strategy to ensure compliance. Where you find yourself on the wrong side of Sars, there is a first mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to protect both yourself and your bank balance from paying the price for what could be the smallest of mistakes. However, where things do go wrong, Sars must be engaged legally.
As a rule of thumb, all correspondence received from Sars should be immediately addressed by a qualified tax specialist or tax attorney, which will serve to safeguard taxpayers against Sars implementing collection measures. Being specialists in their own right, taxpayers will be correctly advised on the most appropriate solution to ensure tax compliance.