Sars tightens tax compliance

R1.265TRN TARGET: DISREGARDING PRESCRIPTION, ISSUING ASSESSMENTS DATING BACK YEARS Until government controls the massive wasteful expenditure, expect that taxpayers will continue to be squeezed in an administratively unjust manner – Bowmans partner Patri

Taxpayers will likely face closer scrutiny as the SA Revenue Service (Sars) ramps up efforts to meet its ambitious R1.265 trillion tax target while economic growth disappoints.

Tax revenue collection has remained resilient in recent fiscal years despite a slowdown in economic growth. But there are concerns this may not be sustainable. Sars’ additional enforcement measures have raised questions about whether it’s tightening screws to meet targets.

Bowmans partner Patricia Williams says Sars can be expected to review larger value items and the outcome of litigation in its favour, and to expand the application to all potentially-affected taxpayers.

“It is also reasonable to assume Sars would consider withdrawing (or updating) industry and other rulings, where these date back more than three years, so that any tax ‘concessions’ are reasonable within a current context.”

In practice, taxpayers have started seeing more aggressive enforcement measures, including refund delays, imposition of heavy understatement penalties, rejection of objections or appeals for being out of time, rigid enforcement of the ‘pay now, argue later’ rule and Sars failing to pay interest owing, Williams says.

“Sars generally has three years for income tax and five years for VAT and other self-assessed taxes in which to issue additional assessments, and Sars would normally have to demonstrate behaviour such as fraud, misrepresentation or non-disclosure, in order to assess after this period.

“We have been seeing Sars disregarding prescription, and issuing assessments dating back many years. In a few instances, Sars has even sought to go back past the record retention period, asking taxpayers for records in situations where the taxpayer has lawfully not retained records, and then estimating tax liabilities for these older periods. This reflects a ‘guilty until proven innocent’ approach and makes a mockery of the tax provisions that state that taxpayers generally only need to retain records for five years from the date of submission of the relevant tax return.”

Legislative changes to continually increase the effective tax rates of already highly-taxed taxpayers, have also been introduced. As a general rule, it appears Sars is using the penalty system as an extra source of revenue, without properly applying its mind to the detailed legal requirements.

Sandile Memela, Sars spokesperson, says its mandate is to collect revenue. Sars does this through increased tax compliance and that’s the only intention of imposing penalties.