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Tax and Compliance Reviews

Past and Recent Trends in Tax and Compliance Reviews

Tax compliance is essential for any enterprise operating in South Africa. Although there are still tax practitioners that are guilty of helping clients avoid taxes, it should be noted that such practices eventually come to light and SARS are not lenient to fraud or evading of taxes.

In general, more and more people are becoming tax compliant and in the majority of cases tax practitioners avoid any form of tax evasion techniques. As such, business owners and individuals alike can rely on the ethical conduct and expertise of tax practitioners from reputable franchise groups for objective and accurate tax and compliance reviews.

Many tax practitioners now go the extra mile to ensure that their handling of tax and compliance reviews are according to the book, because businesses outsource functions such as tax administration, payroll management and accounting to them. This means that the tax practitioners have more accountability and thus ensure the following of best practices.

The SARS Statistics for Tax released for the 2011 period showed that, although they have provided for a voluntary third payment on provisional taxes, most provisional tax payers still preferred the two payment system. Still, many smaller companies, especially small home office businesses, perceive taxes as a tremendous burden; the truth is that under 2% of companies in South Africa pay for over 60% of the company taxes in the country. This means that the taxes received from smaller businesses make up fewer than 50% of the total corporate tax income for SARS.

That being said, small business owners still have to ensure correct tax calculations and benefit from annual compliance reviews by tax consultants or accountants.

On individual level there are already well over 12.5 million tax payers that are registered. SARS have indicated that the majority of individuals do comply with the deadlines for filing of their tax returns. This can be attributed to stiff penalties, more and more people making use of tax consultants or accountants to handle their submissions and also the streamlining of submissions with the eFiling system. Almost all the tax returns that tax practitioners file on behalf of individuals are submitted through the use of the eFiling system.

SARS continues to benefit from the additional income generated because of penalties against registered individual taxpayers who submit late, not-at-all or fail to make payments in time. SARS, however, doesn’t have any trouble in collecting the penalties as the employers can be used for the collection.

When it comes to corporate taxes, compliance levels seem to be lower, but the improvements in IT14 returns help to increase the compliance levels and to accurately show which companies are dormant for more accurate stats on compliance.

The issue of tax clearance certificates is still a topic for debate with SARS still having to deal with people trying to bypass regulations. This means that the tax clearance certificate doesn’t indicate the true tax compliance of a taxpayer. The certificate is merely an indication that the tax payer at the specific date didn’t owe anything on taxes. Tax practitioners from franchise groups such as The Tax Shop assist clients in getting tax clearance certificates according to the regulations and procedures of SARS and the tax laws of the country.

Tax compliance is still high on the radar of SARS as part of their strategic outlook to ensure an increase in the collection of taxes. SARS has their focus on the correct and widespread implementation of the regulations of the Tax Administration Act and has taken steps to identify non-compliant companies and tax practitioners.

Indeed, during the 2012 budget speech it came to light that well over 33 000 tax practitioners owed over R259 million in taxes with many of them also defaulting on their own tax returns. SARS has implemented their risk profiling to identify such practitioners. With such taxpayers can now have more confidence in the abilities and ethical conduct of their tax practitioners, who are now well-regulated.

People can trust that their practitioners will file on time and will have the necessary systems to streamline calculation and submission of taxes. The Tax Shop franchise outlets around the country meet the SARS requirements and offer clients expert guidance regarding submission of tax and compliance reviews are conducted to help clients determine in which areas they need to take corrective steps to ensure full compliance.