PwC’s Annual Taxing Times 2020 Tax Controversy and Dispute Resolution Survey shows that efficiency at the South African Revenue Service (Sars) has improved.
But this has not resulted in the revenue services meeting its tax collection target of R66-billion in the 2019-2020 financial year. This is the sixth consecutive year Sars has missed its tax target. The revenue service’s commissioner, Edward Kieswetter, estimated that the shortfall for this year would be R285-billion.
Sars has been battling with declining staff morale and performance. But this year’s missed target can be attributed to the hamstrung economy and tax deferrals made to companies who could not meet their yearly obligations as a result of the Covid-19-induced lockdown.
The survey, which was conducted between May and June, gauges taxpayers’ experience when dealing with Sars. Companies answer questions that address Sars’s auditing and debt management processes.
The information from the survey will be used to assist Sars with ways to improve its efficiency and build public trust and confidence in the tax administration system.
The assessment found that when it comes to corporate tax, 48% (up from last year’s 42%) of companies feel that they are extremely likely to be selected for an audit verification by Sars, after submitting their corporate income tax returns. According to the survey, this shows that Sars is performing audits regularly and “perhaps in an effort to detect noncompliance as well as to meet its revenue targets”.
In its efforts to do so, 96% of respondents consider Sars’s requests for information to have met the requirements of the Tax Administration Act. The survey said this indicated Sars’s efforts to improve compliance with its own obligations under the Act.
The Act promotes a better balance between the powers and duties of Sars and the rights and obligations of taxpayers and to make this relationship more transparent.
When it comes to the suspension of payment requests, 43% taxpayers indicated that this year more information has been requested after their submission compared with 33% last year. Although this is the case, “nearly a third of respondents say that Sars is amenable to accepting suspension of payment applications”.
The survey said that value-added tax (VAT) refunds are a potential drain on Sars’s revenue if they are subjected to dishonest practices. Verification is important to combat dishonesty.
But only 65% of respondents reported that their VAT verification gets finalised within 21 days after submitting documentation.
In relation to transfer pricing audits — which ensures that the cross-border transactions between related parties take place at the same price — more than 30% of respondents said the relevance of certain documents requested by Sars was unclear, 41% are of the view that the process is drawn out and takes more than 12 months to finalise (which is an improvement from 52% in 2019).
Sars told the Mail & Guardian that it is constantly working on improving its interactions with taxpayers. “We are also providing taxpayers with an improved service offering, which will enhance their experience. We are encouraged by positive feedback but acknowledge that there are challenges in other areas”, Sars said.
But Covid-19 proved to be a challenge, with only a quarter of the respondents believing that the treasury and Sars did enough and 30% say that more should have been done to assist with the tax relief measure during the lockdown to relieve liquidity and promote business continuity.
Sars said that change in compliance behaviour of taxpayers has been observed since April 2020.
When it came to fairness and trust, 81% of respondents consider rates of corporate taxes to be acceptable and fair, compared with 78% in 2019 and 69% in 2018.
Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian