No fast-tracking of incorrect tax compliance for tax clearance

THE ENHANCED tax compliance status system, introduced more than two years ago, seems to be working smoothly.

However, there are a few glitches and it appears that these glitches cannot be sorted out quickly.

Taxpayers normally require a tax clearance certificate when they are applying for a tender or a bid, to confirm that a business or a person is in good standing, or that they are tax compliant when emigrating from South Africa.

The new system allows taxpayers to obtain a unique pin which can be used by third parties such as government departments (for tenders) or the South African Reserve Bank (for the foreign investment allowance) to verify the taxpayer’s compliance status.

Taxpayers can print a tax clearance certificate through the e-Filing system, eliminating visits to a South African Revenue Service (Sars) branch for this purpose.

Webber Wentzel tax partner Joon Chong said administrative and procedural factors beyond taxpayers’ control had appeared.

The result of these factors is that a taxpayer is reflected as being non-compliant even though he is compliant. This is normally where there has been an information mismatch. Tax practitioners say the fact that there is no urgent channel to deal with these issues may put the pain back into the system.

The newly released Service Charter to keep Sars on its service toes does not deal with any remedies to taxpayers with urgent matters. This includes an incorrect compliance status which can be severely disruptive and harmful to taxpayers if not dealt with on an urgent basis.

Chong gave an example where a taxpayer had applied for relief in terms of the voluntary disclosure programme (confessing to previous tax deviances).

Even though an agreement between Sars and the taxpayer had been reached about a later date of payment or where the agreement was entered into, but not yet signed, the taxpayer might still be shown as non-compliant on the system.

Mazars tax consultant Sharon MacHutchon said she had come across some issues recently, where there had been a mismatch of information.

Taxpayers had made payments or they have filed outstanding returns, yet Sars’s systems continued to reflect an outstanding tax return or outstanding tax debt.

MacHutchon said the system did not take account of the “exception to the rules”. In instances where a suspension of payment had been allowed because of an objection to an assessment, or when terms have been agreed upon by Sars and the taxpayer, the system only reflected the statement of account.

If there was an outstanding balance, then the system sees it as non-compliance.

Chong, committee member of the South African Institute of Tax Professionals, said Sars seemed to think that the new system still protected the confidentiality of the taxpayer’s information.

However, the system provided third parties with a description of the taxpayer’s tax compliance status, which included a detailed statement of the area and amount of non-compliance.

This was not provided to third parties under the old tax clearance certificate system.

“Taxpayers have to provide their pin to third parties, which could be interpreted as the taxpayer impliedly giving consent for their confidential information to be disclosed in the description of their compliance status.”

Taxpayers should remedy any non-compliant status immediately before providing their unique pin to accounting officers or government institutions for compliance status verification. Sars did not respond to questions.