Sars has gazetted far-reaching new regulations that will give it access to a greater range of third-party information it can use to cross-check returns submitted by taxpayers.”These new regulations will greatly enhance Sars’ ability to verify the accuracy of information submitted by taxpayers,” says Ettiene Retief, chairperson of the National Tax and Sars Stakeholders Committees at the South African Institute of Professional Accountants (Saipa). “It’s a clear indication that Sars is getting more serious about collecting the tax monies due to it.”
Mr Retief puts the regulations into context by explaining that over the past few years, Sars had begun to find new ways of checking the accuracy of information submitted by taxpayers and employers. An electronic reconciliation and issuing of IRP5 employees’ tax certificates was introduced to pre-populate on personal income tax returns and thereby reduce capture errors. Sars also started to look for other third-party data sources that it could use to subject information on tax returns to more rigorous testing, such as medical aid contributions, medical out-of-pocket expenses, retirement annuity contributions, and interest earnings.
“One of the biggest changes in the new Tax Administration Act is the broadening of the scope of the information that Sars can request,” Mr Retief explains. “Whereas before they had to request specific information relating to a particular taxpayer, now they can use ‘general specificity’ to request more general information; for example, a bank might be requested to submit a list of all South African residents with a balance in excess of a certain amount.”
Perhaps even more significantly the new Sars regulation, gazetted on 5 April in terms of the new Tax Administration Act (28 of 2011), creates a whole new set of filings that certain institutions must make biannually disclosing certain transactions. The institutions concerned include banks; co-operative banks; Postbank; certain financial institutions defined in the Financial Services Board Act; JSE-listed companies and those that issue bonds, debentures and similar financial instruments on their behalf; state-owned companies; organs of state that issue bonds or similar financial instruments; medical schemes; estate agents and attorneys.
The filings cover a wide range of transactions, including rental and investment income, interest payments, royalties, the proceeds of the sale of financial instruments, retirement income contributions, life insurance pay-outs and medical aid contributions.
The new regulations will also ensure that information is received in a specific electronic format, which allows Sars to systematically audit taxpayer disclosure, as well as expand the range of pre-populated information to the personal income tax return in years to come.
Mr Retief says that some institutions and individuals may not yet be aware of their new obligations to submit these reports twice-yearly to Sars. “Institutions that handle transactions on behalf of others should consult the gazetted regulations to ascertain if the new regulation will affect them and, if so, what they need to disclose,” he says.
More broadly, he advises taxpayers to be aware of the extent to which Sars can now draw on third-party information to cross check the information submitted on tax returns. “Now, more than ever, taxpayers must be diligent about keeping good records, and devoting time and care to filling out their tax returns accurately,” Mr Retief says. “If their figures do not match those supplied to Sars by the institutions listed in the Government Gazette, they could find themselves flagged for an audit or worse.”
* South African Institute of Professional Accountants