By Tax Consulting SA
With the 2023 Annual Budget Speech around the corner, Commissioner of the South African Revenue Service (“SARS”), Edward Kieswetter, has been quite vocal in stating there will be no increase in current tax rates, nor the imposition of any further taxes, including a “wealth tax” as alluded to in last year’s address.
This comes off the back of SARS’ increased focus on collections of tax debts over the last fiscal period, yielding unprecedented results, including an increase in “compliance dividends”, but this is just the beginning.
SARS’ Philosophy for 2023?
The revenue authority has been very clear on the internal strife faced, and in taking government to task on poor service delivery, however its key focus remains to increase the currently low level of compliance across the nation’s tax base, as stated by Kieswetter:
“The bad news is we have low levels of compliance in relative terms. The good news is it provides us low hanging fruit to work on.”
Practically, we have seen this bear fruit for SARS. The fiscal spend going into collections is more than warranted, not only by monies recovered, and non-compliance remedied, but also with the investigative power put into distilling valid VAT refunds, in contrast to fraudulent ones.
Making non-compliance costly, whilst making voluntary compliance easy, for taxpayers, is a fine balancing act, which the revenue collector is still mastering, but at a pace which should be cause for concern for all those who, for the longest time, have let their taxes take a backseat.
Looking to the Future, without Paying for the Sins of the Past
Looking forward, we do envisage SARS ramping up its staff contingent, to aid in voluntary compliance. This spans from the dispute arena, where it is known there is a backlog on Appeals where the value is sub-R1 million rand, to the tax debt space, where obtaining a tax clearance is the end-game for most non-compliant business owners.
The expected knock-on effect here, is more effective, and efficient service being provided to taxpayers seeking voluntary compliance, but also more aggressive and efficient measures being implemented against those who remain non-compliant, either knowingly, or negligently. The scope of this predicted show of force, will extend beyond the taxpayer themselves, and be imposed on the shrewd advisor, who has either misguided the taxpayer, or had some other dubious strategy at play.
A Word of Warning
Although we are not a firm to make predictions on SARS’ actions, we have seen a pattern over the years, and taxpayer must be aware – non-compliance can be detrimental to not just a business, but to your lifestyle as a whole. Measures historically, and currently imposed, can include 3rd party appointments, whereby funds are extracted from ones bank account, sheriff call-outs and attachments of property, and even judgements being taken against the offending party.
In more extreme cases, and where the legal systems’ involvement is required, over and above the fiscus, taxpayers, and by extension, possibly their advisors, have seen convictions, resulting in severe fines and in some instances even jail-time, being imposed by the courts.
If anything, taxpayers can expect an increase in convictions of this nature, focusing on defrauding the fiscus, professional negligence, and a host of other charges.
Compliance is Key – Be Pro-Active
What we have found, is that, where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory assistance, to ensure the necessary remedial steps are taken. However, where things do go wrong, SARS must be engaged legally, and we generally find them to be agreeable to the utmost 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 the taxpayer will also be correctly advised on the most appropriate solution to ensure their tax compliance.