Tax Administration: Some challenges facing South African taxpayers
08 September 2015
Posted by: Author: Alan Lewis
Author: Alan Lewis (ACBS)
Alan Lewis identifies some of the challenges that the taxpaying community in general and small to medium sized enterprises, in particular, may face in their interactions with SARS.
There are many challenges that face the business community today. In addition to a difficult trading environment, which has been brought about by the global financial condition, business owners face stiff competition from Internet marketing initiatives, and international competitors, who may have established new markets in our country. Our economy also faces unique challenges to its expansion to become more competitive and to create opportunities for citizens.
Our fiscal legislation, continues to be amended on a regular basis and practitioners, and taxpayers alike, are forced to keep up to pace with legislation that may not always be easy to understand and which poses a very real challenge to taxpayers who do not have immediate access to suitably qualified advisers.
The following aspects of tax administration, appear to cause particular problems for taxpayers:
- Responding to SARS' requests for the verification of the taxpayer's VAT returns
- Objecting to assessments
- Claiming payment of interest on tax refunds
- Claiming payment of a VAT refund
- A taxpayer's right to request copies of an assessment
Responding to SARS' requests for the verification of the taxpayer's VAT returns
While SARS is legally entitled to verify the content of your VAT return, their communication in this regard may be very confusing. Many taxpayer have apparently failed to reply appropriately to these communications with rather painful results.
It is vitally important to respond timeously to the notification of verification of a particular VAT return. If you are required to submit documentation, make sure that it has been delivered to SARS, and that you have not simply stored it on e-filing.
This is one area where taxpayer's appear to be dropping the ball. They consistently make two mistakes: they fail to set out the grounds of their objection, and they also ignore the prescribed time periods in which they are supposed to take the various steps, such as delivery of the objection. The rules which govern these matters are clear: firstly, an objection must set out the grounds of that objection in detail: yes, in detail.
This means that the Notice of Objection must be completed in full; it must specify the amount or part of the assessment, to which it is directed, and the grounds of objection, which th
e taxpayer disputes, and it must identify the documents, on which the objection is based, which are not yet in SARS possession.
Secondly, in the absence of an application for an extension, the same rules prescribe a period of 30 business days, in which to deliver your objection to SARS.
Where a taxpayer has failed to complete the prescribed Notice of Objection, or failed to specify the grounds of objection in detail, SARS may notify the taxpayer that the objection is invalid. At this stage, the aggrieved taxpayer has 2 choices: either deliver an amended objection within 20 business days of the date of the notice of invalidity, or approach the court for an order declaring that the objection is indeed valid.
Claiming payment of a VAT refund and interest on that refund
SARS will not simply pay a VAT refund out to you: you must claim payment in writing. Many taxpayers are unaware of their right to claim interest on a refund, which has been delayed. These refunds, and interest payments, can make a significant difference to the financial wellbeing of their businesses.
A taxpayer's right to request copies of tax assessments
The Tax Administration Act grants a taxpayer the right to request SARS to produce a certified copy of the recorded particulars of each assessment, which SARS has issued on that taxpayer. Where SARS issues a demand for payment, of outstanding taxes, particularly amounts relating to historic assessments, the taxpayer can demand that SARS produces such a certified copy, to substantiate their claim for payment.
In the absence of that certified copy, it might be very difficult for SARS to prove that it has assessed the taxpayer, and demand payment of allegedly outstanding taxes.
This article first appeared on the July/August 2015 edition on Tax Talk.