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Sars widens its net with next-level auto-registrations

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South Africans who have not yet registered for personal income tax for whatever reason may find that they are now registered thanks to the help of the South African Revenue Service (Sars).

October saw Sars start the auto-registration of taxpayers where it detected “economic activity” through information obtained from third-party data providers (see list further on).

It has since auto-registered more than 180 000 individual taxpayers who have not previously appeared on the tax register.

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“Sars will send an SMS and a letter to such an individual, officially welcoming them as a registered taxpayer and informing them of how to access our services and what their rights and obligations are,” it says in a statement.

According to a spokesperson, Sars is still in the process of “cleaning up” data with regards to the auto-registration of companies and sole proprietors, as well as trusts and their beneficiaries.

Given the fact that there are companies that have been created for the sole purpose of defrauding the fiscus (through, for example, value-added tax refunds), or trusts created to hide assets, the process of making sure that legitimate taxpayers are registered for tax purposes is arduous.

“Once the data have been cleaned up Sars will be in a better position to indicate progress with the auto-registration [of these entities],” it says.

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None of the auto-registered individual taxpayers have yet been assessed.

The potential gains for the fiscus with the widening of the tax base is not known.

Economic activities

Carmen Westermeyer, partner at Maitland & Associates, says trust beneficiaries, directors of companies and people with significant movements of money have been identified.

She believes those who have relied on the fact that they did not have a tax number to sneak below the radar have cause for concern.

Westermeyer, who was speaking during a webinar of The Tax Faculty, says taxpayers who have had large amounts of money moving through their bank accounts, but who are not registered taxpayers, will have to answer some “uncomfortable” questions.

Sars is requesting detailed line-by-line verification of all the credit amounts in bank statements.

It is going through a similar process with companies linked to these individuals, to [compare] movements in the bank accounts to the financial statements of the company.

Read: Tax compliance efforts yield billions for the fiscus

Westermeyer believes there is a “bank reconciliation process” taking place, adding that although there haven’t been many such queries yet, the fact that some have already surfaced shows this is something Sars is focusing on.

Getting your affairs in order

Historically, being on a payroll has been a trigger for auto-registration through the pay-as-you-earn (PAYE) tax process.

The auto-registration drive now underway is aimed at allowing Sars to register people through “any other mechanism”, Westermeyer adds.

Sars issued a statement this week reminding “a qualifying individual, company or trust” of its Voluntary Disclosure Programme (VDP) to disclose defaults and regularise their tax affairs.

“Sars would like to encourage all taxpayers who may be in default on their tax affairs to approach Sars via the Voluntary Disclosure Programme.

“By coming forward willingly, such taxpayers will receive help and advice to expedite the resolution of their request,” Sars says in its statement.

A successful applicant will be granted relief from penalties and may avoid possible criminal prosecution.

However, if Sars discovers non-compliance through third-party data or its own investigations, this assistance and possible relief will not be available.

“While voluntary compliance is our first preference, Sars is refining its capability to detect and make it hard and costly for non-compliant taxpayers,” it warns.

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Tax defaults range from having outstanding returns, submitting inaccurate or incomplete information, or failing to submit information requested by Sars in relation to any tax type.

Third-party data providers that are obliged to send information to Sars include, among others:

  • Banks;
  • Medical schemes;
  • Attorneys;
  • Estate agents;
  • Companies listed on the JSE;
  • Co-operatives as well as any person who purchases livestock, produce, timber, ore, mineral or precious stones from a primary producer other than for retail purposes;
  • Co-operative banks;
  • Long-term insurers, pension funds and collective investment schemes;
  • State-owned companies that issue bonds, debentures, or financial products;
  • Any person who pays an amount of interest to or for the benefit of a foreign person; and
  • SA resident companies, foreign resident companies whose shares are listed on the JSE, and regulated intermediaries paying dividends and foreign dividends.

Read/listen: Sars’s ‘compliance dividend’ boosts mid-term budget

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