Tax administrations around the world have been putting a wide range of measures in place to support corporate and individual taxpayers during the Covid-19 pandemic.
South Africa has followed suit, but has focused on small and medium-sized enterprises (SMMEs) and left large companies to their own devices.
The African Tax Administration Forum (Ataf) on Wednesday released a guideline of measures that African countries can consider, most of them in line with those suggested and implemented by OECD (Organisation for Economic Development and Coordination) member countries.
Ataf executive secretary Logan Wort says extraordinary times call for extraordinary measures. “Revenue authorities throughout the world are facing a truly unprecedented situation as a result of the Covid-19 pandemic.”
Ataf suggests that tax authorities introduce:
- Measures to expedite tax refund payments;
- A temporary reduction of tax rates;
- Tax rebates for taxpayers who have been significantly affected by the pandemic; and
- The suspension of penalties and interest.
It also suggests the suspension of compliance and enforcement activities, or limiting this to specific situations where there is a clear case of fraud or “elopement of the taxpayer”.
Ataf says the idea with the suspension of compliance and enforcement activities is to not add to the burden of taxpayers during this period or add to the hurdles associated with recovering from the pandemic.
Many countries are allowing additional time for dealing with tax matters, including the extension of filing and tax payment deadlines, the remittance of penalties and interest on late payments, and deferral of tax payments.
In Costa Rica the payment deadline for all taxes has been delayed until the end of December this year, the OECD Forum on Tax Administration reported.
Elle-Sarah Rossato, lead of tax controversy and dispute resolution at PwC, says the South African Revenue Service (Sars) has not provided any relaxation on payment of tax debts, besides the relief announced in the draft disaster management tax relief administration bill.
However, there has been an extension of days that will not be taken into account for dispute resolution procedures, ruling applications, notices to attend interviews, inquiries and field audits, warrants for search and seizure and prescriptions of assessments in the Tax Administration Act (TAA). The extension of days relates to the period of the 21-day lockdown – March 26 to April 16, 2020.
Rossato, chair of the tax administration committee at the South African Institute of Tax Professionals, says Sars is likely to proceed with third party appointments according to standard practice for collecting tax debt (for garnishee orders on taxpayers’ wages and bank accounts).
“We do however remain optimistic that Sars will align and act in accordance with the comments made by the Sars commissioner, and the president’s announcement, to be understanding of the business and taxpayer pressure and needs in this time of crisis and recovery post lockdown.”
The OECD has suggested a temporary change in auditing policies, particularly for taxpayers for whom audits involve a proportionately greater diversion of resources and time.
The French tax authority has suspended all current tax audits and announced that no new audits will be started. The exception is where a reimbursement may be due to a taxpayer.
In Hungary audits of large taxpayers designated for comprehensive audits in 2020 will be rescheduled in light of the pandemic. Similar plans exist for SMEs and individuals.
In SA it appears that Sars will continue with audits insofar as its workforce is able to do so remotely.
“The difficulty will surely be approvals by specialists or managers and also audit committees which will test its ability to work virtually,” says Rossato.
She says PwC has seen an uptake of client requests to assist with normal compliance and other tax-related services. Several clients do not have the ability to conduct these functions remotely.
Ataf urges African revenue authorities to expedite the turnaround time for the payment of refunds. Compliant taxpayers and taxpayers in essential sectors should be prioritised for expedited refunds.
The forum says it is probably a good idea to consider the suspension of the payment of interest on outstanding Vat refunds.
“The priority should be to pay out as much [in] refunds as quickly as possible and not to prioritise refunds based on interest that may be accumulating.”
In Australia the majority of refunds are automatically issued within six days. However, if a refund is stopped and the client is identified as being impacted by Covid-19, additional efforts are made to process it as quickly as possible.
Rossato says PwC is not aware of specific announcements to fast track the release of refunds, besides Sars’s confirmation earlier that it will release R2.4 billion of refunds during the lockdown.
She says the immediate tax relief measures granted earlier to SMEs with a turnover of less than R50 million are welcomed, although they will be of little assistance to many small businesses, certainly in isolation of other measures.
She questions the exclusion of larger businesses from relief measures. “One can only be hopeful that Sars will consider deferral arrangements and remittance of interest on unpaid taxes fairly on a case-by-case basis, taking all specific taxpayer circumstances into consideration.”
The TAA does provide for this relief, she notes.