In­crease in Sars’ au­dits and penal­ties – sur­vey

The Star Late Edition - - BUSINESS NEWS - Ka­belo Khu­malo

THE South African Rev­enue Ser­vice (Sars) has been con­duct­ing more au­dits and has had fre­quent ap­pli­ca­tions of penal­ties as it seeks to keep up with the ever in­creas­ing na­tional Bud­get in a strained econ­omy.

This is ac­cord­ing to pro­fes­sional ser­vices firm KPMG, which re­cently con­ducted its global tax dis­putes bench­mark­ing sur­vey.

Roula Had­ji­paschalis, the di­rec­tor for cor­po­rate tax and le­gal at KPMG SA, said the re­sults of their sur­vey in­di­cated that the ma­jor­ity of re­spon­dents were ex­pe­ri­enc­ing in­creased dif­fi­culty in reach­ing res­o­lu­tions with the tax au­thor­i­ties, with the South African sit­u­a­tion more pro­nounced.

She at­trib­uted this to in­creased ag­gres­sive­ness by Sars with it ex­pect­ing tax­pay­ers to con­cede sub­stan­tially all of the tax in dis­pute.

“With re­gard to the South African re­spon­dents, ev­ery sin­gle one of them noted that they had re­ceived more re­quests for in­for­ma­tion (which sig­nals the be­gin­ning of a tax au­dit), more au­dits, a greater use of for­mal pow­ers to ob­tain in­for­ma­tion, more ag­gres­sive­ness in rais­ing as­sess­ments and more fre­quent ap­pli­ca­tion of penal­ties,” said Had­ji­paschalis.

KPMG’s global sur­vey was based on a study of 270 peo­ple in charge of the tax func­tions and op­er­a­tions of com­pa­nies in all ma­jor in­dus­tries based in 35 coun­tries world­wide.

The study found that be­hav­iour was chang­ing among tax au­thor­i­ties world­wide, with feed­back sug­gest­ing tax ex­ec­u­tives were find­ing tax ad­min­is­tra­tions in­creas­ingly dif­fi­cult to deal with.

About 54 per­cent of re­spon­dent com­pa­nies have a bud­get for man­ag­ing tax dis­putes, with 40 per­cent of these re­spon­dents say­ing their bud­get for man­ag­ing tax dis­putes was more than 10 per­cent of the tax func­tion’s bud­get over­all.

Only 30 per­cent of the re­spon­dents utilise tech­nol­ogy to mon­i­tor the num­ber and na­ture of their or­gan­i­sa­tion’s tax dis­putes glob­ally and only one-quar­ter of these re­spon­dents use a dis­putes-spe­cific soft­ware plat­form.

How­ever, 40 per­cent of the re­spon­dents said they ex­pected their use of tech­nol­ogy for man­ag­ing and mon­i­tor­ing tax dis­putes to change in the next two years.

Big trans­ac­tions Had­ji­paschalis said it was wor­ry­ing that Sars was also au­dit­ing large trans­ac­tions that were more than three years passed from the date of assess­ment and us­ing that to dis­rupt busi­ness deal­ings.

“Sars is us­ing in­creased pow- ers in terms of the Tax Administration Act to achieve this and it is af­fect­ing com­mer­cial trans­ac­tions that large cor­po­rates are plan­ning (eg say a list­ing) un­til the dis­putes with Sars are re­solved.”

Sars has been un­der pres­sure to col­lect suf­fi­cient rev­enues to meet the re­quire­ments of the na­tional Bud­get af­ter it re­vised down its rev­enue col­lec­tion es­ti­mates from R1.175 tril­lion in Fe­bru­ary 2016 to R1.114 tril­lion in Fe­bru­ary this year, a down­ward re­vi­sion of R30 bil­lion.

This was the sec­ond multi­bil­lion short­fall since the R60bn down­ward re­vi­sion in the 2009/10 fi­nan­cial year.

It said last week that per- sonal in­come tax (PIT), cor­po­rate in­come tax (CIT), VAT along with cus­toms and ex­cise in ag­gre­gate re­mained the largest sources of tax rev­enue and rep­re­sented about 94.5 per­cent of to­tal tax rev­enue col­lec­tions.

The largest con­trib­u­tor was PIT, which ac­counted for 37.2 per­cent of to­tal rev­enue, fol­lowed by net VAT con­tribut­ing 25.2 per­cent and CIT col­lec­tions were 18.1 per­cent. Cus­toms and ex­cise col­lec­tions contributed 27 per­cent to col­lec­tions.

The fi­nan­cial ser­vices sec­tor re­mained the largest CIT con­trib­u­tor to to­tal net rev­enue at 49.7 per­cent, re­flect­ing a yearon-year growth of 7.4 per­cent.

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