Tag: SARS

City of Tshwane cuts off SAPS, SARS and Gautrain

By Molaole Montsho and Sihle Mlambo for IOL

The City of Tshwane has disconnected water and electricity supply at the Gautrain’s Hatfield Station due to non-payment of a R10-million rates bill, the City said on Tuesday.

On its Twitter account the City of Tshwane said Gautrain owed over R10 million and that they last paid their account in 2020.

However, Gautrain said on its social media platform that all Gautrain train services were operational and travelling according to schedule.

They said the disconnection of services was illegal and said they would be heading to court on an urgent basis to force the City to reinstate services.

“Yesterday officials from the City of Tshwane cut off water supply to Hatfield Gautrain station claiming that it was owed approximately R10m for services. This afternoon the City cut off electricity supply to the station.

“Hatfield station has a pre-paid electricity meter and the account is not only up to date but in credit to the value of approx R120 000. The water account is also up to date.

“We’ve been trying without success to contact the City to provide a statement of account and last night, the City shared a screengrab with us which reflects an account number that differs to the account number reflected on their notice to terminate services.

“The City has illegally cut off services to the station. Given that the water and electricity accounts for the station are paid in full and are up to date, we are calling on the City to urgently reconnect the water and electricity supply to Hatfield station and to avail itself to meet so that we can obtain a full statement of account rather than a screengrab,” the Gautrain said.

They added that they would be approaching the court to urgently interdict the City to restore services to the station “given its wrongful termination of services to Hatfield station”.

The City of Tshwane has been on an aggressive drive to collect billions of Rands owed to it by defaulting businesses, embassies, government departments and state owned companies.

Last week, the City said it was owed over R17bn in unpaid water, lights and property rates.

The SA Revenue Service (SARS) and the SA Police Service Headquarters were among those disconnected on Tuesday.

“SAPS Headquarters disconnected. The landlord (Mendo Properties) owe us R5.1 mil … SARS is the tenant. We are owed by the landlord,” the city said.

SARS said the building it occupied at Ashlea Gardens in Pretoria does not belong to them.

“We wish to put it on record that the building occupied by the organisation does not belong to SARS. It is a leased property, and to date, all services have been paid for, in full and on time.

“We sincerely apologise to taxpayers for the inconvenience that this may have caused. We will engage with the owners of the property, with the view to have this matter attended to as a matter of urgency,” the revenue collector said in a statement.

It said in the meantime, the office was using a generator and remains operational.

In a statement, City of Tshwane spokesperson Sipho Stuurman said the City encouraged all clients to pay their accounts to avoid service interruptions.

“The City of Tshwane has noted a concerning trend of non-payment due to disputes being lodged regarding certain services on municipal accounts,“ Stuurman said.

“We would like to make it clear that a dispute on a service line, such as electricity, does not exempt customers from paying for other municipal services, such as water, sanitation and waste services. It is important that customers continue to honour payments on all services consumed while a dispute is being addressed,” he said.

 

Get ahead on 2022 taxes

By Colin Timmis, general country manager and professional accountant, Xero South Africa

The South African Revenue Service (SARS) 2020 revenue outcome highlighted the severe economic impact of COVID‐19 on a struggling economy. As a result, expectations of tax base growth have deteriorated since the 2020 Budget.

Effective tax collection and expanding the tax-payer base are key ingredients to fostering economic growth. That’s why it’s more important than ever for SMBs to file their taxes correctly and on time to avoid a nasty fine.

The secret to successful filing is not leaving things to the last minute. As tax deadlines approach, SARS becomes busier and waiting times get longer. That’s why now is the perfect time to start laying the groundwork for your company’s 2022 taxes. Here are a few simple steps you can start taking now:

Get smart about eFiling taxes

Tax was one of the nine areas we outlined in our Time to Rebuild Manifesto, which set out recommendations for the government. One of these was making the tax process more streamlined and encouraging tech adoption to close the tax gap. Xero research shows that 27 percent of SMBs find submitting tax returns to be one of the top challenges they face.

The good news is that the process is already improving for small businesses. The introduction of eFiling options and integrations with popular technology solutions have made filing taxes with SARS simpler than ever. Most businesses – 81.2 percent in the 2019-20 financial year – have already adopted eFiling (according to SARS), but if yours hasn’t, now is a great time to make the switch.

We’ve integrated VAT eFiling directly into Xero so that SMBs can create, store and submit returns in a few simple steps. Learn how.

Organise what you can now

Get ahead of the crowd by ensuring that you have all your registration details correct now. SARS issues penalties for incorrect details, but it only takes a few minutes to check that everything is in order. Businesses that eFile can check their details online on the SARS website.

Keep your accountant or tax expert close

Our research shows that the pandemic has caused almost half of small businesses – 49 percent – to value their accountant as a business advisor, not just a number cruncher.

Almost a quarter of SMBs, 23 percent, have received a penalty fine because they did not understand the tax rules. Accountants are a valuable resource when it comes to understanding regulation and avoiding fines, and small business owners should use their knowledge to ensure they remain compliant. Your accountant can help you to maintain a healthy relationship with SARS and ensure that you’re confident about which exemptions apply.

Automate painful processes with technology

Constant engagement with finances isn’t just about taxes. There’s significant value to adopting an accounting system that takes in data at regular intervals and provides a deep understanding of how your business is doing throughout the year.

That’s why many businesses choose to adopt cloud accounting software, which can automatically share data through bank feeds. Bank feeds automatically and securely import your banking transactions into your accounting software each day.

This ensures that you can maintain a clear view of your financial position in the lead up to tax season and beyond. This will save you hours of time manually reconciling transactions at the last minute.

Go paperless

Technology can also free you from mountains of paperwork. The age of boxes of receipts, expense paperwork and invoices is over. Managing lots of paper documents is inefficient and introduces opportunities for human error, but fortunately there are plenty of tools that enable businesses of all sizes to go digital.

Modern accounting software, for instance, enables business owners and employees to simply take a picture of a receipt and upload it directly to their accounting platform. This will then automatically pull across all the information ready for efficient tax filing.

Stay informed

As we all know, circumstances can change quickly and nobody knows what’s around the corner. That’s why it’s important to listen out for updates from SARS and tips from the small business community.

SARS extends filing deadline

By Martin Hesse Time for IOL

The South African Revenue Service (SARS) has extended the filing deadline for non-provisional taxpayers. The deadline, which was today, Tuesday November 23, has been extended to December 2.

In a statement released today, SARS says it is pleased with the overwhelming response it has received from taxpayers who have submitted their personal income tax returns since 1 July this year.

“SARS would like to thank these taxpayers for responding to our strategic intent of promoting a culture of voluntary compliance.

“However, to afford other taxpayers the opportunity to comply with their legal requirements, SARS will extend the filing season deadline for non-provisional individual taxpayers from November 23 to December 2.

“SARS is acutely aware of the systemic issues the organisation has experienced, as well as the impact of load-shedding on taxpayers which made it difficult for taxpayers to file their returns.

“As a result, the date for levying of penalties on taxpayers that have not filed their return will be extended and implemented in January 2022,” SARS says.

SARS urges taxpayers to use its convenient digital channels: eFiling, SARS MobiApp, as well as the SMS service, which has the number 47277. By sending an SMS to this number, you can book an appointment at a SARS branch, check if you need to file a return and be helped with other services.

The SARS website has also been upgraded to allow for more digital services to taxpayers. For more information on these services, visit www.sars.gov.za

SARS says it remains committed “to make it simple and easy for taxpayers to meet their legal obligations and hopes that the extension of the filing season deadline will encourage greater compliance among taxpayers”.

Source: Tech Financials

The judgment again serves as a cautionary tale where contracts are drafted without an understanding of the tax implications, which can make for a nasty surprise down the line.

On 21 May 2021, the Constitutional Court handed victory to SARS in a decision that may have sweeping ramifications for retailers who operate loyalty plans similar to the Clicks ClubCard loyalty programme.

What was at stake for Clicks and other retailers?
The matter of Clicks Retailers (Pty) Limited v Commissioner for the South African Revenue Service [2021] ZACC 11 involved the application of section 24C of the Income Tax Act No. 58 of 1962 to its loyalty programme.

Section 24C allows taxpayers to defer paying tax on income if it accrues in terms of a contract and that income will also be used to finance future expenditure. The taxpayer may then, in terms of section 24C, claim a deduction in respect of such future expenditure, provided the income and the obligation to incur the future expenditure arise from the same contract.

In this case, Clicks sought to utilise this provision on the basis that its ClubCard loyalty programme creates an obligation to incur future expenditure when cardholders earn loyalty points by making purchases at Clicks stores. The loyalty points awarded translate to a cost that Clicks will incur on the merchandise provided to customers upon redemption of cashback vouchers. In other words, when Clicks makes a sale for which it receives income, an obligation is created at the same time to incur a cost at a future date.

Clicks return 2% of the value of all qualifying purchases to customers and its inability to deduct this cost will have a significant impact on its cash flow. The import of the judgment, however, extends well beyond the interests of Clicks. The court acknowledged that other retailers such as Pick ‘n Pay, Dischem, Ster Kinekor and Exclusive Books, to name a few, will also be impacted by the court’s decision.

The dispute
SARS maintained that Clicks is not eligible for the section 24C deduction, as the income it receives and the obligation to incur the future expenditure arise from separate contracts.

Clicks succeeded in the Tax Court, which concluded that the income-earning contract and that which gives rise to the obligation (the ClubCard contract), are inextricably linked. SARS appealed to the Supreme Court of Appeal (“SCA”). It is important to note that Clicks’ appeal was heard shortly after the SCA handed down judgment in Commissioner, South African Revenue Service v Big G Restaurants (Pty) Ltd [2018] ZASCA 179; 2019 (3) SA 90 (SCA) (“Big G”), which dealt with the same issue.

In Big G, the SCA rejected the notion that section 24C applies where the contracts are “inextricably linked” – the income and the obligation must emanate from the same contract. The SCA, therefore, set aside the Tax Court’s decision. But Big G took the matter to the Constitutional Court, where the interpretation of section 24C was widened, albeit slightly. The Constitutional Court confirmed section 24C may apply where there is more than one contract, provided they are so inextricably linked that they satisfy the requirement of “sameness”.

Big G lost the appeal, but it gave Clicks another bite at the cherry. Clicks filed its appeal to the Constitutional Court, which accepted that there is significant factual overlap and an inextricable link between the ClubCard contract that imposes the obligation to incur a future expenditure and the contract of sale. However, it is not sufficient for the two contracts to be inextricably linked; the link must be of such a nature that they give rise to a “sameness”.

In the present matter, the Constitutional Court found that the link between the two contracts do not render either dependent on the other for its existence; they operate together but they do not meet the requirement of contractual sameness. The upshot is that section 24C does not apply to Click’s ClubCard loyalty programme and the retailer incorrectly claimed these deductions.

Analysis
While the matter does not involve a constitutional question, the Constitutional Court accepted, as with Big G, that Clicks should be granted leave to engage its jurisdiction on the basis that the matter involved an arguable point of law which is of general public importance. The court held that this is evidenced by the divergent approaches taken by the Tax Court and the SCA, and the importance to the general public lies in the potential impact for other operators of such loyalty programmes.

The decision to entertain the matter must be welcomed, as it allowed the court to shed some light on the application of section 24C, by giving definition to the sameness test where two or more contracts are involved.

What does the judgment mean for other retailers?
Other entities that similarly sought to claim the section 24C allowance must carefully study the judgment against the operation of their own loyalty programmes. But with a model that is hardly unique, it is difficult to see how their fate would be any different and it is possible that they might inadvertently find themselves in a position of non-compliance.

The judgment again serves as a cautionary tale where contracts are drafted without an understanding of the tax implications, which can make for a nasty surprise down the line.

 

 

By Hanno Labuschagne for MyBroadband

The South African Revenue Service (SARS) has announced hundreds of vacancies for skilled workers across various fields as part of its plan to modernise its tax compliance systems with new and evolving technologies.

“SARS is preparing for a future where increasingly our work will be informed by data driven insights, self-learning computers, artificial intelligence and interconnectivity of people and devices,” the tax authority stated.

“Mindful of this, we are evolving our workforce to prepare for this exciting changed and changing world of work.”

“Whilst we continue to develop our own employees, we invite talented and passionate executives, who share our strong public service ethos and unmistakeable commitment to improving the material conditions and wellbeing of all South Africans,” SARS said.

These employees would assist in SARS’s mandate of ensuring optimal compliance with tax and customs legislation in South Africa.

Available positions
In addition to 200 South Africans who have recently graduated in the fields of Customs, Chartered Accountancy, Auditing and Legal, SARS is seeking 370 highly skilled leaders and specialists in specialised roles.

The latter includes Information and Technology specialists with the looking aptitudes:

  • Developers (C#, Java, Angular, Web, Data Warehouse [ETL/C#])
  • Database Administrators (SQL, Adabas)
  • Integration Designers
  • Websphere Application Server Specialists
  • SAP Specialists (GRC, FICA, HCM, SRM, Development & Integration)
  • IT Security Engineer
  • Software Engineers
  • Server Engineers (Wintel)

Other fields outside of IT in which vacancies are being offered include:

  • Data Management
  • Audit and Risk
  • Investigations and Auditing with specific focus on Tax Evasion and related matters
  • Legal Specialists and Consultants
  • Governance, Risk, and Compliance Specialists
  • Specialists in Trust Practice, Research and Analysis, Strategy and Advisory, Interpretive Tax Policy & Compliance

Massmart loses R1bn tax refund appeal

By Dineo Faku for IOL

Massmart has suffered yet another blow after the Supreme Court of Appeal ruled that the retailer could not claim nearly R1-billion worth of losses from the taxman for a share incentive scheme implemented 20 years ago for senior managers.

The Supreme Court of Appeal dismissed Massmart’s appeal of a court decision that gave the SA Revenue Service (Sars) a right to disallow R945 million in capital losses claimed by the group.

In his judgment, the appeal Judge Visvanathan Ponnan, said that the unpaid loans plainly constituted an asset in the hands of Massmart.

“There could thus be no loss to speak of. Instead, what Massmart purported to do was to account for the trust’s losses in its books,” Judge Ponnan said. “This despite the fact that at the outset they had received legal advice from Mr Lewis that they could not, by arrangement between them and the trust, change the incidence of capital gains or losses.”

The court action stems from the decision by Sars to block the capital losses claimed by Massmart after the company could not identify the asset disposed of which gave rise to the capital loss.

Massmart, the owners of Game, Makro and Builders Warehouse brands, approached the SCA after the Tax Court of South Africa dismissed the

company’s determination that it had suffered R954m capital losses during its 2007 to 2013 years of assessment by virtue of its dealings with the trust.

In 2000, Massmart resolved to adopt a share incentive scheme for its key management personnel, conducted through the Massmart Holdings Limited Employee Share Trust.

On June 12, 2000, the Trust Deed for the trust was adopted by Massmart, and the first trustees of the trust were an accountant, Mark Franklin, and Stephen Lewis, an attorney at Edward

Nathan and Friedland Incorporated.

Judge Ponnan said in his judgment that Massmart’s witnesses Franklin, former chief executive, Guy Hayward, the assistant to the share trust administrator, Sena Farquhar, had not helped the company’s case.

“Far from supporting Massmart’s case, the evidence of the three witnesses appears to have bolstered Sars’s contention that the notion that the so-called right constituted an asset, is illusory and an ex post facto reconstruction to establish a basis by Massmart for a claim for capital gains,” said Judge Ponnan.

For instance, during his testimony, when asked what was the basis upon which capital losses were claimed previously by Massmart before the appeal, Hayward said: “I have, M’Lord, I have no recollection, I’m not clear on that … I do not know that personally.”

While Franklin accepted that the funds that Massmart had advanced to the trust were recorded as loans, he testified, however, that there was never any intention that the loans would be repaid.

He could also not explain why the loans were recorded as unpaid loans in the financial statements of the trust and the balances were carried forward to each succeeding year.

Franklin had said it was for accounting purposes that funds advanced to the trust were described as loans because there was never any intention that it should be repaid.

“Well, it could have been described otherwise, but it was not a loan in the sense that a loan means that the trust was required to repay it, because the trust had no funds. “So it would never have been able to repay it,” Franklin said. “So in that respect the term loan is probably misleading.”

 

By Simnikiwe Mzekandaba for ITWeb

Some cyber security experts say the South African Revenue Service’s (SARS’s) decision to introduce a Web browser that supports defunct Adobe Flash Player has “severe” cyber security implications.

Citizens have also taken to social media to express their dismay at the revenue service’s decision to roll out a browser that enables Flash Player.

This week, SARS announced the release of an alternate SARS browser solution, as it tries to deal with the aftermath of the delay in migrating all eFiling forms from Adobe Flash to its chosen HTML5 platform.

In its statement, the tax collecting agency says taxpayers will be able to complete and submit the Flash-based forms not migrated to HTML5, in the interim, while it completes the migration.

“The SARS browser enables access to all eFiling forms, including those that require Adobe Flash, thus maintaining compliance with your filing obligations.”

SARS adds that existing Web browsers such as Chrome and Edge will continue to work for all forms already migrated.

Desperate measures
Even though software company Adobe announced in July 2017 that it will stop supporting Flash Player post 31 December 2020, SARS has been behind in completing the migration process.

As a result of the disruption caused by the migration holdup, last week the taxman said it would implement some remedial actions to assist taxpayers still experiencing issues.

At the time, the taxman didn’t point to a SARS browser among its list of solutions to deal with the disruption caused by the discontinuation of Adobe Flash, but has now indicated its availability.

Cyber security and small business expert Hennie Ferreira says SARS is obviously desperate for a solution; however, the current solution is not safe.

“Flash Player is no longer a secure technology and any solution that involves using Flash Player is not secure. I think SARS is making the matter worse by putting taxpayers at risk by using unsafe technologies.”

Ferreira highlights the only solution around the Flash Player issues is to not use it at all. “SARS should process all requests via e-mail and their call centres manually until they have fixed the eFilling system.”

SARS notes the browser is currently compatible with Windows devices only, a move that Ferreira says still excludes the thousands of Mac and Linux users.

Jason Jordaan, principal forensic analyst at digital forensics firm DFIR Labs, comments that it was not a good decision on the part of SARS to release a “new” browser, adding that it just contributes to confusion on the part of the end-user.

“The bottom line is that SARS had well over three years to migrate from Flash and they simply did not get it done in time. They had certainly been working on it as a lot of functionality was no longer dependent on Flash.

“SARS clearly had the capability to transition away from Flash, and had demonstrated that they could do so successfully. My concern is that deploying a new browser instead of simply fixing the problem (that they were aware of), on time, is an ineffective use of resources, at a time when all of us in the country are expected to tighten our belts.”

Unnecessary risk
SARS says its browser cannot be used for general Internet surfing, as it deploys as a separate application and can only be used to access the SARS eFiling Web site and SARS corporate Web site.

Ferreira emphasises that the security implications are severe. “It places every taxpayer, who still needs Flash Player to use the browser, at risk of cyber attacks. Adobe recommended to remove Flash Player completely or to uninstall it as it is insecure and will open computers up to cyber attacks.

“The second problem is that it also places the entire eFilling system at risk and makes the entire system vulnerable by using outdated and insecure technologies.

“The risks are not only on the forms that use Flash Player, but also creates the possibility for hackers to use Flash Player’s vulnerabilities to penetrate SARS’s systems and pivot further attacks from there.”

Jordaan notes that using a product that is no longer supported carries risks. “The browser that SARS has released is a Chromium-based browser, and while the latest Chromium build has Flash support removed, it is possible to still enable Flash to run.”

Compliance considerations
Ferreira stresses that the situation is a national embarrassment for SARS as it was well aware of the discontinuation of Flash Player.

“This is not acceptable and it clearly demonstrates the incompetence from SARS’s IT department to act in this way and ignore cyber security norms and standards and put their own systems and taxpayers’ systems at risk.

“Businesses in South Africa, under the POPI Act, are obliged to implement cyber security protocols by law or face serious consequences. By being forced to use insecure technologies by SARS, this means they are not POPI-compliant as there is a well-known vulnerability that is not being addressed and can place all personal information that they process at risk.

“There is a very good reason why all major browsers stopped supporting Flash Player and removed it from their software. Flash Player is a security risk. SARS is doing the opposite by providing a browser that continues to use Flash Player, despite Adobe clearly instructing everyone not to do so. Google Chrome, Mozilla Firefox, Microsoft Edge, Apple Safari, Opera Browser, and pretty much any other safe browser, discontinued its support for Flash Player.”

 

New tax rules you should know about

By Jean du Toit for IOL

The President has given effect to the 2020 tax proposals by signing three tax Acts into law. On 15 January 2021, the President gave his assent to the Rates and Monetary Amounts and Amendment of Revenue Laws Act No. 22 of 2020 (“Rates Act”), the Taxation Laws Amendment Act No. 23 of 2020 (“TLAA”) and the Tax Administration Laws Amendment Act No. 24 of 2020 (“TALAA”). These Acts were promulgated on 20 January 2021.

The Rates Act gives effect to changes in tax rates and certain monetary thresholds, whereas the TLAA and the TALAA contain more profound technical and administrative changes. Highlighted below are 10 key changes taxpayers need to know.

1.Withdrawal of retirement funds upon emigration

From 1 March 2021, taxpayers will no longer be able to access their retirement benefits upon completion of the emigration process through the South African Reserve Bank, commonly referred to as “financial emigration”. After this date, taxpayers will only be able to access their retirement benefits if they can prove they have been non-resident for tax purposes for an uninterrupted period of three years. Importantly, taxpayers can still access their retirement benefits under the old dispensation if they file their financial emigration application on or before 28 February 2021. If you miss this deadline, your retirement benefits will be locked in for a period of at least three years

2.Anti-avoidance rules bolstered for trusts

The anti-avoidance rules aimed at curbing tax-free transfers of wealth to trusts have been strengthened to prevent persisting loopholes. The amendment is directed at structures where individuals subscribe for preference shares with no or a low rate of return in a company owned by a trust connected to the individual. Ongoing changes to these rules again bring into question the thinking that trust structures are tax efficient.

3.Reimbursing employees for business travel expenses

Employees are not subject to tax on an amount paid by their employer as an advance or reimbursement in respect of meals and incidental costs where the employee is obliged to spend a night away from home for business purposes, provided it does not exceed the amount published in the Government Gazette. The TLAA includes an amendment which extends the treatment to expenses incurred on meals and other incidental costs while the employee is away on a day trip. It is important to note that this will only apply if the employer’s policies expressly make provision for and allows such reimbursement.

4.Relief for expats confirmed

Due to the travel restrictions under the Covid-19 pandemic, the days requirement for the foreign employment exemption has been reduced from 183 days in aggregate to 117 days. The relaxation only applies to the aggregate number of days and the requirement that more than 60 of the days spent outside South Africa must have been consecutive remains applicable. This amendment is not a permanent fixture and will only apply to any 12-month period for the years of assessment ending from 29 February 2020 to 28 February 2021.

5.Employer provided bursaries

The Income Tax Act makes provision for the exemption of bona fide bursaries or scholarships granted by employers to employees or their relatives. Historically, employees used this exemption as a mechanism to structure their remuneration package to reduce their tax liability. The exemption will no longer apply where the employee’s remuneration package is subject to an element of salary sacrifice; that is where any portion of their remuneration is reduced or forfeited as a result of the grant of such a bursary or scholarship.

6.Tax treatment of doubtful debts

The doubtful debt allowance provision has been amended to bring parity between taxpayers that apply IFRS 9 and those who do not. Where the taxpayer does not apply IFRS 9, the amount of the allowance is calculated after taking into account any security that is available in respect of that debt.

7.Roll-over amounts claimable under the ETI

The Employment Tax Incentive Act has been amended to encourage tax compliance. The amendment determines that excess ETI claims of employers that are non-compliant from a tax perspective will no longer be rolled over to the end of the PAYE reconciliation period.

8.Estimated assessments

The terms under which Sars may issue an assessment based on an estimate has been expanded. Sars may now issue an estimated assessment where the taxpayer fails to respond to a request from Sars for relevant material. The amendment also bars the taxpayer from lodging an objection against the estimated assessment until the taxpayer responds to the request for material.

9. Sars can withhold your refund if you are under criminal investigation

In terms of the Tax Administration Act, Sars is entitled to withhold refunds owed to taxpayers in certain circumstances. The TALAA expands these provisions to determine that if you are subject to a criminal investigation in terms of the Tax Administration Act, Sars is entitled to withhold any refund it owes you, pending the outcome of the investigation.

10.Criminal sanctions for minor tax offences

Previously, a taxpayer would only be guilty of a criminal offence for non-compliance under the Tax Administration Act if they “wilfully” failed to comply with their tax obligations. With the new amendments, non-compliance will constitute a criminal offence where it is as a result of the taxpayer’s negligence. In other words, intent is no longer required; where you are non-compliant as a result of ignorance of your obligations, you may be found guilty of a criminal offence. These offences are subject to a fine or imprisonment of up to two years.

Final comments

Taxpayers need to speak to their advisors to understand these changes and special heed must be paid to the administrative changes that are now law. The most important change that applies to all taxpayers is the one that criminalises negligent non-compliance. This and other administrative changes mean that taxpayers will be held to a higher standard, which serves as a cue for everyone to take ownership of their tax affairs.

 

Who pays taxes in South Africa?

National Treasury and the South African Revenue Service (SARS) have published the annual Tax Statistics for 2020.

The 2020 edition provides an overview of tax revenue collections and tax return information for the 2016 to 2019 tax years, as well as the 2015/16 to 2019/2020 fiscal years.

The highlights of the statistics include:

  • Tax revenue collected amounted to R1 355.8 billion, growing year-on-year by R68.1 billion (5.3%), mainly supported by Personal Income Tax (PIT) which grew by R35.3 billion (7.2%).
  • 1,776,301 (40.9%) of assessed taxpayers were registered in Gauteng;
  • 580,464 of assessed taxpayers lived in the Johannesburg Metro and were taxed on an average taxable income of R512,785;
  • 1,171,410 (27.0%) of assessed taxpayers were aged between 35 to 44 years;
  • 2,352,902 (54.2%) of assessed taxpayers were male and 1,985,021 (45.8%) were female;
  • The assessed taxpayers had aggregate taxable income of R1.6 trillion and a tax liability of R360 billion. Their average tax rate was 22.5% compared to 21.6% in the previous tax year;
  • Income from salaries, wages and other remuneration, as well as pension, overtime and annuities, accounted for 77.6% of total taxable income;
  • Out of the 780,480 companies assessed as at the end of July 2020 for tax year 2018, 25.2% had positive taxable income;
  • 46.6% had taxable income equal to zero and the remaining 28.2% reported an assessed loss.

 

Negligent taxpayers could face jail-time in SA

Source: Supermarket & Retailer

With Government’s draft response being released in the Parliamentary Debate on 13 October 2020, non-compliant taxpayers, be it intentionally or negligently, may soon be facing some serious jail-time.

The draft response proposes a strict, no nonsense approach from the South African Revenue Service (SARS) when it comes to the taxpayer’s compliance, shifting the burden of proof to fall more heavily on the taxpayer than ever before.

SARS-Treasury team-up

Under the current tax regime, a key element of any offence is that it is committed “willfully and without just cause” by the taxpayer, with negligence resulting in a mere wrap on the knuckles in most instances.

The July 2020 Draft TALAB (Tax Administration Laws Amendment Bill) proposes to change this entirely, by the removal of the term “willfully” from the legislation, taking away one more line of defense to taxpayers across the country. This proposed amendment was met with fierce resistance by tax practitioners and taxpayers alike, opposing the opening of this particular can of worms.

In last week’s proceedings, National Treasury and SARS took the opportunity to shoot their shot, proposing this amendment to the Standing Committee on Finance.

Although some leniencies were permitted, the two authorities held their ground on the need for a change in law, more specifically the standards used to measure taxpayers’ behaviour, to enable easier convictions for tax related offences.

Enabling legislative amendments

Although the proposed amendments will have no impact on the existing sanctions for non-compliance, they will widen the net for SARS to catch taxpayers off-guard, and impose these sanctions, for what could be something as simple as a typographical error when completing a return, or any of the other 100 mistakes which may be committed due to human error, which may be viewed as negligent on the part of the taxpayer.

It must be noted that “intent” was not entirely done away with, but rather drawn in to permit more severe sanctions in this instance as these acts are borderline tax evasion, where the “intent” is to defraud SARS.

Strategically speaking, this is a bold yet brilliant move from the SARS-Treasury team, as the inclusion of “negligence”, and retaining of “intent” allows the non-compliance net to be cast wide enough to catch even the smallest fish.

The split

The existing offences are proposed to be split into two categories, being that which requires “intent”, where the heavier burden of proof falls on SARS, and that which either “intent” or “negligence” will suffice, shifting the weight of the burden more on to the taxpayer than ever before.

The existing sanctions, including some serious jail-time and/or a financial fatality in the form of a fine, will remain unchanged, with the case-appropriate sanction being left to the discretion of either SARS (for minor offences) or the National Prosecuting Authority (“NPA”) (in the instance of more severe offences).

First-mover advantage

In order to protect yourself from SARS, it remains the best strategy that you always 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, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to ensure their tax compliance.

 

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