Teething prob­lems

Too early to gauge Rev­enue’s first step to­wards self-as­sess­ment sys­tem

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SWEEP­ING CHANGES to South Africa’s tax sys­tem an­nounced ear­lier this year have been wel­comed by the tax pro­fes­sion, though it’s still too early to say how it’s work­ing in prac­tice. The new sys­tem af­fects the way em­ploy­ers sub­mit their an­nual pay as you earn (PAYE) tax dec­la­ra­tions to SA Rev­enue Ser­vice and the way in­di­vid­u­als re­ceive, com­plete and sub­mit their tax re­turns to Rev­enue. It there­fore af­fects the ac­count­ing pro­fes­sion more than the le­gal.

It comes af­ter ma­jor changes to the sys­tem made last year, with both steps in the di­rec­tion of self-as­sess­ment that Rev­enue has an­nounced as its ul­ti­mate goal.

Der­mot Gaffney, KPMG’s head of in­di­rect tax prac­tice, says notwith­stand­ing the sim­pli­fi­ca­tion, ac­count­ing firms aren’t ex­pe­ri­enc­ing any eas­ing of their work­loads. “The ac­count­ing be­hind the tax re­turns hasn’t al­tered and there’s still a huge ad­min­is­tra­tive bur­den on cor­po­rates, es­pe­cially small busi­nesses. It helps that the in­di­vid­ual should now be able to com­plete his tax re­turn him­self without pro­fes­sional ad­vice – but that’s not the mar­ket of ma­jor ac­count­ing firms.”

Around 500 000 em­ploy­ees are ex­pected to no longer file tax re­turns if they earn less than R120 000/year and meet other cri­te­ria spec­i­fied by Rev­enue.

Rev­enue com­mis­sioner Pravin Gord­han, when an­nounc­ing the changes at the beginning of this year’s tax fil­ing sea­son, said the new changes were in­tended to ease the ad­min­is­tra­tive bur­den on em­ploy­ers. Tax­pay­ers now re­ceive a cus­tomised, pre­pared tax re­turn on re­quest from Rev­enue that’s in­tended to make fil­ing re­turns eas­ier and sim­pler.

Fur­ther, Rev­enue will pro­vide free com­puter soft­ware to com­pa­nies so em­ploy­ers can rec­on­cile any de­duc­tions made from em­ploy­ees with what com­pa­nies pay to it.

Gord­han said this year spe­cific em­pha­sis had been placed on the role of em­ploy­ers in the per­sonal in­come tax sys­tem. Last year the sys­tem un­der­went re­form by chang­ing from a man­ual, pa­per-based process to an elec­tronic, au­to­mated process. Rev­enue elim­i­nated the need for tax­pay­ers to sub­mit sup­port­ing doc­u­men­ta­tion with their tax re­turns. Last year more than 4m re­turns were sub­mit­ted elec­tron­i­cally.

Speak­ing at the launch, Rev­enue COO Ed­ward Kieswet­ter said that in­di­cated grow­ing pub­lic con­fi­dence in the elec­tronic sys- tem. Last year most tax­pay­ers re­ceived their as­sess­ments sig­nif­i­cantly quicker than be­fore, at an av­er­age turn­around time of 20 to 30 days, against 45 to 55 days in 2006. A third of tax re­turns were pro­cessed within 48 hours, com­pared with 1% in 2006. How­ever, Rev­enue found dif­fi­culty with around 1m tax­pay­ers’ re­turns. Those in­cluded in­com­plete and in­cor­rect in­for­ma­tion, some re­turns not match­ing in­for­ma­tion from third par­ties and in some cases re­turns be­ing flagged for fur­ther in­ves­ti­ga­tion.

The cus­tomised, pre­pared tax re­turn will con­tain in­for­ma­tion from third par­ties, such as the tax­payer’s em­ployer, bank and in­sur­ance com­pany. The data is based on Rev­enue’s records of a tax­payer’s in­come, as­sets, li­a­bil­i­ties and de­duc­tions.

With the new sys­tem, there will be two fil­ing sea­sons: one for in­di­vid­u­als and one for em­ploy­ers. Com­pa­nies have a 60-day pe­riod from 1 July to 29 Au­gust to sub­mit em­ployer PAYE de­duc­tions to Rev­enue. Em­ploy­ees can’t re­ceive or sub­mit their tax re­turns un­til em­ploy­ers com­plete their PAYE dec­la­ra­tions to Rev­enue, be­cause their tax re­turns will be “pop­u­lated” by in­for­ma­tion gleaned from em­ploy­ers so there’s less for the em­ployee to com­plete.

David French, as­so­ciate di­rec­tor at Ernst & Young Tax Tech­ni­cal Ser­vices, says it’s a first step to­wards the self-as­sess­ment sys­tem that Rev­enue ul­ti­mately aims to in­tro­duce. “It will be fas­ci­nat­ing to see how well it works,” says French.

In­di­vid­u­als have from 1 Septem­ber un­til 21 Novem­ber to file their re­turns. The dead­line for elec­tronic sub­mis­sions is 23 Jan­uary next year. French says that for com­pa­nies the new, sim­pli­fied elec­tronic process has helped though a num­ber of “teething” prob­lems re­main. “The cur­rent tax sea­son has opened and we haven’t seen the new web­site in­ter­face yet. It’s a large task to com­plete all our clients’ tax re­turns and it’s made more dif­fi­cult if the form of the tax re­turn is pub­lished late. It gives us less time to do the same amount of work,” French says.

“There’s a trend to release the tax re­turn for­mat later and later each year to ac­com­mo­date Rev­enue’s elec­tronic sys­tem. But they must get their sys­tem in place ear­lier to give prac­ti­tion­ers enough time to file re­turns,” adds French.

An­other glitch in the e-fil­ing sys­tem is that some in­di­vid­ual as­sess­ments have been is­sued without the in­di­vid­ual know­ing about it. A tax­payer is sup­posed to be no­ti­fied by e-mail or SMS when­ever his per­sonal pro­file’s been amended so that an ob­jec­tion can be lodged if he ob­jects. “If you don’t get the no­ti­fi­ca­tion you can’t ob­ject in time,” says French. “So there’s some way to go to achieve the req­ui­site level of ma­tu­rity in the sys­tem.”

Em­pha­sis had been placed on the role of em­ploy­ers. Pravin Gord­han

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