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2022-12-06 at 18:49 #385098Nat QuinnKeymaster
The South Africa Revenue Service (SARS) is hardening its attitude towards taxpayer responsibilities, says Neill Hobbs, the CEO of specialist tax advisory firm Hobbs Sinclair.
Hobbs said that the taxman’s change in attitude could be seen in its recent announcements of non-compliance penalties, which took effect on 1 December 2022, as well as the increase in requests for supporting documentation and verification of tax returns.
The tax expert added that his firm had seen a sizeable uptick in the depth of SARS’ requests for clients to justify expenses by providing supporting documentation or motivation after a tax return has been submitted.
“We have seen many requests for information supporting expenses claimed for in a tax return,” he said.
There is also a definite interrogative approach adopted by SARS when reviewing company-assessed losses, with SARS requesting confirmation of the company’s intention to make a profit, business plans and forecasts, and explanations of the reasons why the company is trading at a loss, Sinclair noted.
In its efforts to collect revenue from the private sector, SARS is taking a firm stance on individuals, trusts and private companies by:
Charging admin penalties for late submission of income tax and VAT returns.
Rigorously scrutinising financial statements.
Limiting the deductions against prior years’ tax losses to 80%.
Interrogating expenses and cost of sales, and
Querying the deductibility of expenditure and allowances.
To avoid disallowance, it is important for a watertight complaint submission with supporting documentation for interrogation by SARS to be prepared.
“It is vitally important to justify tax-deductible expenditure before a return is assessed, especially as objections appear to be disallowed out of hand. This opens up the taxpayer to a lengthy and costly appeal if the initial assessment is incorrect and the objection is disallowed,” said Sinclair.
The tax expert cited information released by the Tax Ombudsman that reported that nearly 70% of objections initially disallowed are overturned on appeal.
“This is particularly harsh for the taxpayer, especially as SARS will not withhold collection action in the event of the disallowance of an objection.”
“There has been an increase in instances where SARS is taking monies directly out of taxpayers’ bank accounts to collect taxes due. Alternatively, SARS can instruct debtors to pay amounts owing to the taxpayer directly to them, or they can lodge a judgement against non-compliant taxpayers,” said Sinclair.
He warned that non-compliance to tax regulations can be crippling to an already cash-strapped South African consumer, and for that reason, it is important to be prepared.
Go to SARS before it finds you
Tax specialists at Tax Consulting SA warned earlier this week that it’s in a taxpayer’s best interest to address any tax irregularities with SARS before the tax service finds these issues though its own investigations.
At the end of November, SARS announced that it was making its Voluntary Disclosure Programme (VDP) a permanent fixture.
Through the VDP, by coming forward willingly, taxpayers will receive help and advice from SARS to expedite compliance and regularise their tax affairs.
If SARS finds irregularities on its own – and it is certainly equipping itself to do so – any assistance and waivers applied through the VDP will fall away and the guilty parties will be subject to the full might of the tax service’s reach.
“(Taxpayers) may even expose themselves to criminal prosecution. SARS has recently shown an increasing willingness to prosecute these matters, as has been seen from the recent judgements and the pursuance of action against non-compliant taxpayers, regardless of how high or low profile they may be,” Tax Consulting said.
“As always, we encourage taxpayers to be proactive regarding their tax affairs and not to bury their heads in the sand.”
SARS is not pulling its punches – not even your bank account is safe (businesstech.co.za)
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