The South African Revenue Service (Sars) has withdrawn its list of qualifying physical impairment or disability expenditure following widespread public comments since the draft document was published.
Moneyweb recently reported on the list and the outrage it caused.
Read: Sars wants to limit tax relief for disabled costs (May 27)
People who were affected by the amended list described the attack on the ability of taxpayers to claim tax relief for the education cost of the disabled “mean and disrespectful”.
In the draft list, school fees as a qualifying expense has been removed as Sars argued that school fees are not in the consequence of a disability, but in consequence of education.
The proposed change required an “itemised list” detailing the nature and cost of each intervention, including school fees, to be specified on the invoice or on a covering letter issued by the school.
A ‘misunderstanding’ says Sars
In a statement released on Tuesday (June 1) the revenue authority says many of the public comments appear to be based on a misunderstanding of the intent of the proposed amendments to the list.
“In order to permit more time to engage with stakeholders, explain the intent behind the changes and understand the concerns raised, the decision has been taken to withdraw the draft disability list,” Sars says in its statement.
A further draft disability list “may” be published once this process has concluded. Until then, the current list will remain in force, it says.
The principal of a special needs school in Johannesburg says the proposed change was not practical and would have caused a massive administrative burden on special needs schools.
Many schools would have had to appoint someone to specifically deal with the task of itemising each child’s “interventions”.
“It is just not practical,” she says.
The withdrawal of the list now allows for more time to meet with the Sars disability team.
The principal believes it is critical for Sars to talk to specialists who deal with not only physical disabilities, but also with mental and learning disabilities, to gain a better understanding of the plight of the disabled.
Special needs expenses are not a luxury
“It is not a luxury for parents to send their children to special needs schools. It is a necessity.” In many instances the medication per month alone comes to around R10 000.
Without the tax relief, many parents would not be able to afford the special needs schools. Many would close their doors.
Craig Miller, Tax Director at Webber Wentzel, earlier said the argument that school fees were not in consequence of a disability, but in consequence of education was a very simplistic way of looking at it. He welcomed the withdrawal of the list. It is a positive development that Sars is now prepared to engage with the various stakeholders.
However, it is unclear why Sars refers to a “misunderstanding” about the intent behind the initial list that was published for comment.
It clearly stated school fees are not in consequence of a disability, but in consequence of education. It further stated that school fees “will not qualify as a medical expense under this list”.
“Hopefully there will be proper engagement and common sense will prevail,” says Miller.
Last year parents received the first curveball when school fees for private and public special education needs schools were limited to the amount in excess of fees at their closest fee-paying private or public schools.
The latest approach, which caused the outcry, was to require that the cost of “interventions” at the school “in consequence” of the disability should be listed separately. This includes, among others, a care worker assisting a child, a social worker or psychologist, occupational therapist, physiotherapist or audiologist assisting the learner.
Kyle Mandy, tax technical and policy director at PwC, also welcomed the decision to withdraw the draft list and to engage further with stakeholders.
“We believe that the decision was the appropriate one in the circumstances,” he says.
“We now expect that Sars will initiate a more comprehensive consultation process.”
This includes consultation with a broader range of interested stakeholders through a series of workshops and consultations over the coming months with the objective of obtaining a better understanding of the educational needs and challenges of the disabled, says Mandy.
Keith Engel, CEO of the South African Institute of Taxation, says in its submission to Sars the proposed change would have introduced substantial administrative requirements.
“Although we acknowledge the concern that Sars has with regard to risk management and fraudulent claims, we believe that the current proposal will have the effect of stifling access to the relief that the taxpayers are entitled to as a matter of policy.”
Before any change, the institute believes that specific engagement with special needs schools and related advocacy groups should be undertaken.
“This engagement will assist Sars in balancing the need for revenue collection with the need to provide the taxpayer with adequate tax relief,” says Engel.