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With Sars upping its game to ensure that everybody pays the tax they are supposed to, consumers have to put extra effort into staying out of Sars’ crosshairs. The stakes can be very high, and it does not help that the rules of engagement are always changing.
Taxpayers increasingly feel like they are walking a tightrope from a tax compliance perspective, with the South African Revenue Service (Sars) on one side and a daunting administrative burden on the other.
When it comes to disagreements with the taxman, things certainly have changed from how they used to be, Razael Manikus, COO at Latita Africa, says.
“Providing incomplete answers to Sars requests, with no substantial detail, along with an inclination to try and keep important information away from Sars is now hurting more and more taxpayers. Sars is evolving and to avoid friction with the taxman, taxpayers must adapt.”
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One of the golden rules in tax is that the onus of proof generally falls on the taxpayer, she warns. “At the same time, the tax authority has become increasingly proficient and vigilant in its collection efforts.”
“Prevention is certainly better than cure when it comes to tax. But when things do go wrong, before you decide to lodge a dispute, it is crucial to first be honest about the completeness and accuracy of your submissions and to approach the dispute from that angle,” Manikus says.
She says there are common reasons for tax disputes. “In the past, taxpayers would often point fingers at Sars as the reason for their woes. Denied their deductions and misplaced assessments, despite providing sufficient evidence, were common culprits.
“However, now the tables are turning. An increasing number of tax disputes are arising from taxpayers or their accountants either submitting incorrect or no returns or providing incomplete to no information to Sars verification requests.
“We find more and more that disputes become necessary due to rushing tax return submissions through at the last minute to avoid late penalties. Many times, this is done under the impression that it will be corrected later, which is not always the case and there are many instances when no corrective steps are taken in time. Unfortunately, this only makes matters worse,” Manikus warns.
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The best defence against an adverse tax assessment by Sars is a strong offense, Manikus says. “In other words, proactive tax management. For both businesses and individual taxpayers, integrating tax planning and management into your financial routine is essential. Being well prepared for submissions on time eliminates the need to rush and reduces the risk of costly errors or omissions.”
A strategic, evidence-first approach to your tax affairs is important, she says. “A competent tax advisor will help you to develop a personal and business tax management system that keeps you compliant and resilient to adverse tax events. This should be a hallmark of your relationship with your advisor.”
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Sars is not infallible, Manikus says. “Mistakes can happen and when they do, having a proactive stance allows you to address the issues head-on. Your first step in challenging an incorrect tax assessment is usually to submit a Request for Reasons, compelling Sars to provide definitive reasons for is assessment if one has not already been given. This not only equips you with valuable information to build your case but also keeps Sars to the defined issues later on.”
With an evidence-based approach, meeting the (generally 80-business-day) deadline to lodge an objection becomes a lot more manageable, she says. Even if this deadline is missed, you can still act up to three years later in many cases, provided you have compelling reasons for the delay.
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Navigating the maze of the tax dispute resolution process with Sars requires more than just mere persistence or principle; it demands expertise, Manikus says. “A diligent tax practitioner also knows that a dispute is not the only tool at their disposal. They might, for instance, recommend a (non-contentious) Request for Reduced Assessment when appropriate.”
Understanding the full range of mechanisms available for dealing with Sars is crucial. A qualified tax practitioner, armed with a mastery of these tools and strong legal expertise, can protect your rights throughout the process, she says.
“Sars is to be commended for its commitment to becoming a technologically advanced tax authority, but taxpayers will increasingly need specialist help to stay ahead of the compliance curve, as it remains a moving target.”
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In the world of tax compliance, staying ahead of the game requires more than just following the rules. It requires strategic planning, proactive management and expert guidance, Manikus says.
“As Sars evolves, so must your approach to engagement with the tax man. “In the land of the blind, the one-eyed man is king. Equally so, by taking an evidence-first approach and seeking the right expertise where necessary, you can confidently navigate this new era of tax compliance with a full view of the risks ahead of time and the means to effectively deal with them.”
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