South African taxpayers will for the first time be confronted with a completely virtual tax filing season due to the onset and impact of the third wave of the coronavirus pandemic.
All branches of the South African Revenue Service (Sars) will remain closed for at least six weeks, despite the annual filing season having officially kicked off on Thursday (July 1).
Sars Commissioner Edward Kieswetter discourages any face-to-face engagements at branch offices. Announcing details of this year’s filing season for individuals, he said all efforts are being made to migrate taxpayers to the revenue service’s digital platforms such as eFiling.
Kieswetter says despite an initial good start to the fiscal year, the third wave, rising unemployment, and company closures, especially in the hospitality industry, may have a negative impact on revenue collections going forward.
Economic growth of 4.6% during January to March this year was way ahead of market expectations of 3.2%. Exports, boosted by mining and agriculture, resulted in a trade surplus of R55 billion during May compared to R15 billion in the same period last year.
However, the country finds itself “slap-bang” in the middle of the third wave and its impact is not fully understood. It does present a downside risk.
Kieswetter says Sars remains focused on voluntary compliance and that efforts to recover revenue are yielding promising fruit.
The tax agency has detected 26 000 individuals with economic activities of more than R1 million per annum who are, to its surprise, not registered for tax.
It is also improving its capability to detect fraudulent activities. During the previous filing season it prevented undue refunds of R57 billion for all taxes, and R5 billion for individuals.
Last year Sars paid refunds of R24 billion to more than 2.3 million taxpayers.
Kieswetter acknowledges that refunds are a lifeline for poorer and vulnerable families, and could mean having a meal or paying a bill.
Sars has promised to pay seven out of 10 taxpayers a refund when it is due within 72 hours if no additional information is required.
Last year 77.4% of refunds were paid within 72 hours.
“Sadly, we have noted several attempts to defraud us in terms of disability claims, rental losses, Pay-As-You-Earn credits and business losses.”
Risk and reaction
Sars has introduced new risk dynamics because of Covid-19. These relate to working from home, donations to “the likes of the Solidarity Fund”, and travel expenses – which should be lower because of the Covid-19 restrictions.
The revenue service has also been taking a hard look at itself.
It has completed more than 550 internal corruption cases which resulted in 51 resignations, 55 dismissals and 10 criminal convictions.
The agency is also embarking on a cost configuration exercise because its current ratio of staff to other costs is high.
“As you know, for any business, a high fixed-cost ratio leads to inefficiency,” says Kieswetter. “We need to reconfigure our cost base to be more reflective of what we need to do and to be more reflective of a future modern Sars.”
Sars has also made some promises, including:
- Giving eight out of 10 taxpayers an assessed outcome in under five seconds after the submission of a tax return;
- Paying seven out of 10 taxpayers a refund within 72 hours;
- Completing seven out of 10 verification audits within 21 days; and
- Being more specific when requiring additional or outstanding information or documentation to complete an assessment.
It will again auto-assess more than three million selected taxpayers, based on the information it received from employers, financial institutions and other third party data providers.
Kieswetter says Sars has received 132 million data records (about 10 million more than last year) which are used to auto-assess taxpayers.
This year auto-assessed taxpayers will be able to view the entire return and the data that was used for the assessment outcome.
They must either accept the assessment or edit it if they have additional information.
The deadline for the submission of tax returns by non-provisional taxpayers (taxpayers who do not have additional income such as rental or interest or expenses such as medical aid and travel) is November 23.
Provisional taxpayers – those taxpayers with additional income and expenses – must submit their tax returns by January 31, 2022.