Dealing with Sars: Corporate SA’s experiences

Is Sars raising additional assessments as a ‘fishing expedition’?
More than half of those surveyed feel the technical skills of Sars staff need to improve. Image: Moneyweb

PwC recently published its third annual tax controversy and dispute resolution survey, which benchmarks taxpayer experiences when dealing with the South African Revenue Service (Sars).

The feedback will be used to support constructive engagement with Sars on how it can improve public trust, efficiency, and confidence in the tax administration system, as well as improving stakeholder engagement.


Some of the results of the survey are set out below.

The verification audit process

Highlights include:

  • 48% of corporates feel it is extremely likely they will be selected for a verification audit on submitting their corporate income tax (CIT) return; this could indicate that Sars is performing audits more frequently.
  • 96% consider Sars’s requests for information to have met the requirements of the Tax Administration Act, ‘always’, ‘sometimes’, or ‘most of the time’.
  • 66% felt Sars had granted extensions for submitting information requested ‘most of the time’ or ‘always’.
  • 11% said Sars took more than 12 months to finalise a verification audit, and 49% said it took less than three months. The survey indicated that there was a 6% improvement in finalising a verification audit within three months.

The investigative audit process

After a verification audit, Sars may decide to carry out an investigative audit. The time taken to finalise an investigative audit showed that these audits are taking longer than previously: 20% of respondents alleged that investigative audits took longer than 18 months, 21% said one to three months, 16% said three to six months and 24% said between six and 12 months.

PwC suggested that these audits are either more complicated than in previous years, or that Sars is under-capacitated and lacks the necessary skills and resources to deal with these matters. PwC notes that whatever the reason, the longer time span results in additional costs, delays, and uncertainty for taxpayers.

Sars should keep the taxpayer informed, and is obliged to issue progress reports; however, 80% of respondents say that progress reports are not routinely received. PwC suggests that Sars officials may require more training on the due processes to be followed during an audit.

Once the audit has been completed, Sars must issue an audit findings letter. The taxpayer has the right to respond, within 21 days, outlining its tax position, and either agreeing or disagreeing with the audit findings. In 2019, 42% of respondents said that Sars reconsidered its position, but in 2020 this dropped to 24%, while 66% stated that the letter of assessment (finalisation of audit letter) was identical to the audit findings letter.

Letter of assessment

The letter of assessment must indicate the particular type of assessment, the basis for the adjustment/s, as well as the reasons for the adjustment. If penalties are levied, the reasons must be given. The letter of assessment must provide sufficient reasons to enable the taxpayer to consider whether to object, and to formulate the grounds of objection.

The survey’s findings suggest that Sars is increasingly failing to provide adequate reasons – 25% of participants said that Sars never provides reasons.

According to PwC the results suggest that Sars could be raising additional assessments as a “fishing expedition” and is therefore unable to provide adequate grounds.

Understatement penalties

The letter of assessment must clearly indicate that understatement penalties have been levied, and if so, the level of penalty must be in accordance with the Tax Administration Act (TAA) (Section 223).

The onus is on Sars to prove that the taxpayer is guilty of the particular behaviour it has been penalised for.

As to Sars’s approach in raising understatement penalties – 69% of respondents say the revenue service is aggressive ‘always’ or ‘most of the time’.

This suggests that “Sars does not consider the situation and just imposes penalties with the hope of increasing its collections”, according to the survey report.

“The prospect that Sars is using understatement penalties as a revenue-raising mechanism rather than as a way to incentivise [the] taxpayer is concerning.”

Debt management process

The debt management process runs parallel to the dispute process, and a request for a suspension of payment will stay the payment of the amount due and the interest.

The ‘pay now argue later’ rule can only be suspended if the taxpayer intends to dispute the assessment and has adhered to the conditions imposed by the TAA (Section 164).

The fact that 43% of respondents say that Sars requests more information when a settlement proposal is made could indicate that it is reviewing these applications more critically. Meanwhile, 31% of respondents say that Sars is amenable to accepting settlement proposals, which is an improvement on 2019.

When it came to receiving a response to settlement proposals, 45% of respondents said they received a response within three months, while 28% said it took more than six months.

“In the current economic climate and with Sars having missed its revenue target, it is concerning that Sars, in some instances, takes more than six months to collect such revenue.”

If a taxpayer has made an error of a “non-contentious nature” or wants to regularise its affairs, an application can be made for a reduced assessment. However, Sars interprets the applicable section in the TAA narrowly, as 32% of respondents say that they have ‘never’ been successful, with only 20% achieving a satisfactory outcome ‘most of the time’.

Vat verification and payment of refunds

Vat verification finalised within 21 days of submitting supporting documentation saw 65% of respondents reply in the affirmative.

Vat refunds received within 21 days ‘always’, ‘sometimes’ or ‘most of the time’ – 82% of respondents reported that this was the case.

Transfer pricing audits

When it comes to transfer pricing audits, 31% of respondents say the relevance of certain documents requested by Sars is unclear, while 41% are of the view that the process is drawn out and takes more than 12 months to finalise.

PwC note that the reduction in litigation indicates that more matters are being settled, and that “the gulf between the taxpayer and Sars is narrowing”.

Voluntary disclosure programme (VDP)

While 46% of respondents had made use of the VDP programme, 37% said their applications took more than 12 months to finalise. Only 20% said their applications were finalised within three months. At 54%, more than half of the respondents didn’t think the VDP process was of any use, and 73% felt that an Interpretation Note would be helpful.

Sars service delivery

The Sars Service Charter makes no difference to the quality of Sars’s service delivery, according to 47% of the respondents, while 98% believe that the key performance indicators of Sars officials should be linked to the Sars Service Charter in order to incentivise improved performance. Only 33% of respondents said that Sars complies with the time periods ‘most of the time.’

Covid-19 tax relief measures

While 24% of respondents said the relief measures helped them significantly, 32% said they did not help at all; overall, 30% of respondents said more should have been done to assist taxpayers with tax relief measures.


  • 54% of respondents took no action to reduce or discontinue any of their tax obligations,
  • 34% took advantage of payment relief for PAYE, and
  • 20% reduced or discontinued their provisional tax payments.

Only 3% of respondents said Sars was ‘always’ prepared to help them during lockdown, 23% said Sars was ‘never’ prepared to help them, and 88% of respondents were of the view that the administrative time frames should have been extended during lockdown.

Sars should improve its communication skills

When it comes to their communcations with Sars, 22% of respondents said they have an ongoing relationship with a Sars relationship manager, 13% tried unsuccessfully to communicate with Sars, and 7% said their mail goes to an unattended email address.

At 55%, more than one in every two respondents say the technical skills of Sars staff should be improved.

Almost a third (32%) of respondents favour the improving of Sars’s enforcement capabilities to broaden the tax base.

Additional feedback from respondents

“The amount of information requested to apply for relief … was ridiculous.”

“Sars made the process onerous and confusing.”

“The information requested by Sars was burdensome … did not have the capacity to review it all … did not have the capability to assess what they were reviewing …”

PwC will be discussing the results of its survey with Sars and the Tax Ombud on September 9, the third day of the Tax Indaba, which Moneyweb will be covering.



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Where has anything done by government worked to the expectation of the people?… I have stopped dreaming a long time ago.

Interesting article.
Transfer pricing audits do apparently lack enough skilled staff by SARS’s own admission. The entire illicit flow of money out of the country (BEPS) seems to be a huge challenge to SARS in terms of enough skilled staff.

End of comments.



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