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The changing tax landscape

01 August 2007   (0 Comments)
Posted by: Author: Nazrien Kader
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The Changing Tax Landscape
 
Nazrien Kader, a qualified chartered accountant (with Honours in Taxation), is the business unit leader for Taxation Services at Deloitte in KwaZulu-Natal.As member of the Income Tax Court of South Africa and an active member of the South African Institute of Chartered Accountants (SAICA), she has seen the South African tax landscape change over the past decade.
 
Given my involvement in the world of taxation over the past 12 years, I have to admit that it has evolved dramatically.Taxpayers have certainly become more vigilant about their obligations to SARS.Whilst many still adopt an intuitive approach to tax management, the fact that tax is by far the largest 'expense' on the income statement, has warranted a change in the way taxpayers view taxes in general.   

There is certainly more opportunity today for taxpayers and practitioners to provide comments and be heard on proposed tax legislation before it becomes effective, which is very welcome.Of course, the drafters of legislation are not always pleased to give effect to recommendations by taxpayers and practitioners, which is probably where the battle lines are drawn.Indeed, many of the employees of SARS (particularly those involved with the Large Business Centre) have been trained by professional services firms (both accounting and legal) and/or have years of practical experience.
  
Consequently, the queries raised are, on balance, no longer frivolous and generally demonstrate a level of understanding of the commercial aspects.Whilst SARS has implemented rigorous enforcement strategies which have been criticised in some instances, the depth and quality of our interactions with SARS employees have improved significantly.Therefore, even though we debate issues vigorously, one can generally appreciate the contentions advanced.

The complexity of our tax regime

Here I can safely say that our tax regime has definitely become more complex.The past decade has been historic for tax reform, both in policy and process.Changes in tax laws have come fast and furiously.An estimated R493 billion in taxes was collected by SARS in 2006/7 due to economic growth, tax policy reform and improvements in administrative efficiency.

A primary criticism by taxpayers and practitioners alike has been that the costs of compliance are far too onerous.SARS has responded by taking significant steps to reduce the regulatory burden on the so-called SMME sector.

The recent launch of the simplified 2007 tax return for individuals is also an example of steps taken by SARS to reduce the pain.But the wheels turn very slowly.The reality is that there is still a need to apply complex legislation that is subject to interpretation.
 
Generally, on contentious issues, there is not a 'meeting of minds' between SARS and the taxpayer. Legislation that is subject to interpretation is also not generally interpreted contra fiscum (that is, in favour of the taxpayer) with the consequence that the process of resolution is lengthy and quite draining on taxpayers, both emotionally and financially.Whilst here too SARS has come to the party by implementing alternative dispute resolution procedures and timelines that SARS is obliged to adhere to, the costs and resources required to challenge issues sometimes far outweigh the benefits of certainty and closure.
 
This does not set good precedents going forward, as settlements are reached in some instances,where taxpayers capitulate on issues of principle.Our general anti-avoidance rules have also grown in volume and complexity.The recent introduction of the Advance Tax Rulings system with a view to giving taxpayers guidance and certainty on the tax consequences of high value, complex transactions comes at a cost. 

What we can look forward to Given that there is still the perception that (sophisticated) taxpayers who can afford the services of tax advisors fully intend and actually manage to pay less tax than they should, I guess we can expect more regulation of practitioners and more rigorous enforcement.As it stands, given the emphasis on enforcement on the part of SARS, taxpayers have sought to focus on tax compliance.As a business, we recommend that tax management (compliance as well as strategy) should be a comprehensive process that should be considered as part of the overall business risk management processes and structures that are applied and implemented.

As South Africa plays more strongly in the global arena, we can look forward to SARS following international trends more speedily.SARS has gone on record as saying that their response will be proportional to the behaviour of taxpayers and businesses.
 
Those who are compliant and low risk will be given excellent service; there will be service and education for those seeking to be compliant but who may not understand their obligations; and assistance and understanding for those who make honest mistakes. 

The full weight of the law, however, will be brought to bear on those who are knowingly non-compliant. We are cautiously hopeful that once taxpayers are seen to be taking their tax obligations more seriously, SARS will relent somewhat.
 
Source: By  Nazrien Kader (TaxTALK)

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