Over the past few years, South Africa’s tax landscape has undergone significant change, with a number of leadership, structural and policy changes; and moreover, the Covid-19 pandemic has impacted government coffers, disrupted businesses and placed tremendous financial strain on individuals.
In response to this, government has introduced a number of economic measures, including tax relief, to protect businesses and alleviate financial pressure on vulnerable employees.
These are some of the key highlights from the fourth edition of firm PwC’s Annual Taxing Times Survey.
The survey was created to benchmark corporate taxpayers’ experiences when dealing with the South African Revenue Service (Sars).
The latest survey was conducted between May and June. A total of 159 respondents completed the survey.
Taxpayers from across 21 industries participated in the survey, with the financial services sector being the biggest contributor.
“This year’s results were telling, as they tested taxpayer perceptions regarding interactions across a multitude of channels with Sars in challenging times.
“In some areas the results were positive, such as a significant improvement in the turnaround time of Voluntary Disclosure Programmes (VDPs) and value-added tax refund pay-outs.
“In other areas, however, such as finalising audits, service delivery, delays in settlement proposals, as well as overall communication with taxpayers, Sars did not fare well,” PwC partner and Tax Controversy & Dispute Resolution Africa lead Elle-Sarah Rossato says.
The report presents respondents’ feedback across the following areas – VDP, issues faced by corporates in managing audits and disputes, the re-capacitation of the high wealth individual taxpayers’ unit at Sars, Sars’ service delivery and the impact of the Covid-19 measures on respondents’ tax affairs.
In terms of the audit process, over half (54%) of survey participants felt that they were extremely likely to be selected for an audit or verification by Sars following the submission of their corporate income tax returns.
That compares with 48% in 2020.
This year’s results also showed that only 32% of respondents had had their income tax verifications finalised in one to three months, which was a sharp decline from 49% in 2020, and 43% in 2019.
The report also found that the VDP facilitated a process in which taxpayers voluntarily disclosed prior defaults or understatements and made full disclosure of their tax affairs, thereby relieving Sars from having to engage in time-consuming audits.
This year, 40% of survey respondents said they had made use of the VDP process, a decrease from 46% in 2020.
Only 27% of taxpayers reported that their VDP was finalised within three months, while 21% stated that their VDP application was finalised more than 12 months later.
For Sars’ delivery process, more than half of survey participants (57%) believed the Sars Service Charter made ‘no difference’ to the quality of Sars’ service delivery.
The majority of respondents (97%) believed Sars’ official key performance indicators should be linked to the Service Charter to incentivise improved performance by Sars officials.
In terms of Covid-19 measures, half of the respondents believed Sars and the National Treasury had not done enough to assist taxpayers with tax relief during the pandemic and lockdown to relieve liquidity and promote business continuity.
Twenty-five per cent of survey participants stated that they reduced or discontinued pay-as-you-earn payments and 20% discontinued or reduced their provisional tax payments.
When asked whether Sars was equipped to handle their company’s queries or service-related issues during lockdown, only 4% of respondents felt Sars was always equipped, while 32% believed Sars was never equipped to handle their queries.
The survey analysed respondents’ responses to questions concerning deterrence, complexity of the tax system, and fairness and trust, each of which influence taxpayer behaviour and the tax authority’s success in collecting revenue.
The majority of respondents (92%) believed it was somewhat likely or extremely likely that they would be audited by Sars during the tax year. This was an increase from 89% in 2020. This increase was expected to lead to increases in future tax compliance.
Notably, 67% of respondents stated that public trust had not been restored in Sars. Only 16% believed that it had been restored.
Lastly, in terms of the revitalisation of the high wealth individual taxpayers’ unit, survey participants were asked if they believed this revival and renewed focus on high-income earning taxpayers would assist in closing the tax gap.
Almost half (47%) believed it would, 36% said it would not and the remaining 16% indicated that they somewhat believed this measure would assist in closing the tax gap.
Survey participants were asked what they thought Sars should do to improve its service to taxpayers.
This year, 18% said Sars should improve the technical skills of its officials, as opposed to 55% last year.
Similar to last year, 23% of respondents believed Sars should employ more staff and improve turnaround times, and 22% stated that facilities to communicate with Sars should be improved.