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Tax compliance lies at the heart of nation building

Thursday, 18 February 2016   (0 Comments)
Posted by: Author: Beatrie Gouws
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Author: Beatrie Gouws (BDlive)

The South African Revenue Service’s (SARS’s) main objective is the efficient and effective collection of revenue. One of the cornerstones of a good collection system is strong risk rules. An effective spend of resources requires a good understanding where the maximum value and perceived risks lie.

One of SARS’s initiatives in 2015 was its effort to close personal income tax loopholes. This focus makes sense when one considers that personal income tax, at 35.9% of total revenue collected for 2014-15, represents the largest and also more than a one-third of SA’s total revenue.

In SA, more than 90% of personal income tax is collected via the employee tax system (PAYE) with the remainder being collected via provisional tax and on assessment. Over the past few of years, SARS has standardised the tax reporting process for employees’ tax to such an extent that most individuals’ tax returns can be prepopulated. This means that when it comes to the use of risk engines to determine where resources should be deployed, employees’ tax is by far the most likely candidate to produce workable results.

Enter the 2016 Budget Review. This year we are likely to see very limited adjustments to personal income tax brackets and rebates to take account of inflation or "bracket creep". From all reports, there is a strong possibility of increased personal income tax rates and possibly a super tax on the wealthy.

With the personal income tax environment (and as a result employees’ tax) becoming more heated, there is a greater possibility of individuals and employers engaging in complex tax structuring.

A note of caution to taxpayers: the National Treasury, SARS and indeed SA as a whole cannot afford a drop in tax morality when it comes to personal income tax and employees’ tax. It follows that SARS’s focus, driven by the importance of the income stream and guided by sophisticated risk engines, will be firmly on individuals and employers.

We must all do our part. In the words of former finance minister Nhlanhla Nene: "Tax compliance lies at the heart of nation building and social cohesion. Without buoyant revenue base, a nation cannot develop and succeed."

  • Gouws is associate director: global mobility services and employment tax advisory at KPMG

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