The decision by the South African Revenue Service (Sars) to shorten the 2018 Tax Season by three weeks is likely to put pressure on tax practitioners and may even result in penalties for taxpayers.
Sars announced on Monday that non-provisional taxpayers (most taxpayers fall into this category) and provisional taxpayers who file at a branch will have to submit their tax returns by October 31, 2018 – three weeks earlier than usual. As a result, most taxpayers and practitioners will have 18 fewer business days to meet the deadline.
Acting Sars commissioner Mark Kingon said the shorter filing season would allow additional time for Sars, taxpayers and the tax fraternity to deal with return verifications before most taxpayers go on holiday in December.
“Often there are delays with taxpayers having to respond to our queries and requests over the holiday break,” he said.
In many ways, this would enable Sars to process refunds that are due before the holiday season, Kingon added.
Roughly 65% of all individual non-provisional taxpayers file their returns within the first three months of the tax season, after which submissions decline, followed by a spike towards the end of the season.
Sharon Smulders, associate professor at the Department of Financial Intelligence at Unisa, said it was possible to meet the earlier filing deadline, but warned that many taxpayers procrastinate and that tax practitioners might come under a lot of pressure as a result.
Tax practitioners would need to educate their clients to provide information earlier than usual, she said.
Patricia Williams, partner at Bowmans, said there are concerns that tax practitioners do not have enough time to plan for the change and that they might have to juggle a lot of things in a shorter space of time.
Against this background, there were proposals that the change should only be introduced in 2019.
The announcement follows the publication of a draft public notice in the Government Gazette on May 9 as well as engagements with recognised controlling bodies. The consultation process highlighted concerns about the increased workload for tax practitioners.
To overcome this issue, it was proposed that the tax season should also start three weeks earlier. Kingon said this was not a feasible proposal at this stage, but would be considered in future years.
Referring to the consultation process with tax practitioners, Keith Engel, CEO of the South African Institute of Tax Professionals, said that while a small minority of tax professionals were either opposed to the idea or in favour of it, most people felt “indifferent”.
Internationally, a number of countries have a three-month filing season, with six months seemingly an outlier. The new deadline would reduce the local season from roughly five to four months.
Engel said the general view seems to be that most people would be able to meet the earlier deadline. The only issue was that a lot of people were visiting Sars branches unnecessarily.
If Sars could not relieve the pressure on its branches with new initiatives, the shorter tax season could exacerbate the problem.
During the 2017 tax season, 1.6 million people filed a tax return even though they were not required to do so. In 2016, 1.8 million people filed unnecessarily. Large numbers of registered eFilers also visited branches to file. In 2017, 868 562 taxpayers did so (2016: 935 269).
Even tax practitioners visited branches to do eFiling on behalf of clients, with 120 000 tax practitioners doing so last year (2016: 132 000). Many job seekers also went to branches to obtain an income tax number, even though their employers could register them electronically via e@syFile.
To alleviate the pressure on branches, Sars had sent out direct communication to taxpayers who might not have to file a return, based on information submitted during the 2017 tax season, Kingon said.
Smulders cautioned that there was a risk that the Sars system could mistakenly flag a taxpayer for non-submission in the upcoming tax season based on 2017 figures, and issue fines and penalties. While the taxpayer’s circumstances could be different in 2018, and they might not need to submit, the Sars system would not be aware of this.
Provisional taxpayers who file via eFiling have to do so by January 31, 2019. The deadline for manual submissions through post or at a Sars drop box is September 21, 2018.
The 2018 tax season will start on July 1 as usual.