Every year, the National Treasury solicits input from South
African citizens on items that they believe should be included in
the Budget Proposals announced by the Minister of Finance, Pravin
Gordhan, in his Budget Speech.
What used to be 'Tips for Trevor' became 'Points for
Pravin', and in each Budget Speech a lucky citizen gets an
honorary mention for their tip or point.
If I had to make only one point to Pravin, my point would be;
cut the red tape, make it easy for taxpayers to get on the tax
register, to comply and to pay their fair share of taxes.
There are many examples where this could be applied, but a
particular challenge that has received widespread coverage over the
last few years is the process to register as a vendor for Value
Added Tax (VAT) purposes. Despite this coverage we seem to be no
closer to resolving the issue and in fact it appears that the
process will become more problematic in future with, for example,
the introduction of biometric information.
The process to register as a vendor is long and cumbersome
– there is a long list of documents that are required and the
representative vendor is obliged to appear personally for an
interview with the South African Revenue Services (SARS). Depending
on which SARS office you go to, the list of documents required
could change and one leaves with the impression that the goal posts
are continually being shifted. SARS, for example, insists on seeing
proof of trading before they register the vendor, which makes it
difficult for a vendor that is buying a business as a going
concern, or who knows that the capital they have invested is likely
to push them over the threshold from the first month. Unusual
registrations like the registration of a non-resident company or a
foreign donor-funded project for VAT is also very problematic.
In some instances, I am sure this has the effect of dissuading
taxpayers from applying for registration, even when they are
obliged to do so (that is, when their registration is
It is understandable that SARS is concerned with the risk
of fraudulent refunds, but it is hard to see how making it
difficult for legitimate taxpayers to get on the register mitigates
this risk. After all, if one wanted to perpetrate a fraud, surely
it would make sense to purchase a company that already has a VAT
number, and use that as the vehicle to perpetrate the fraud? SARS
gives you a hard time with initial registration, but has no
processes in place to vet companies that have changed shareholding
or representative vendors.
It seems that an inordinate amount of time is wasted on making
it difficult to register instead of focusing on the refund itself
– if the risk is that of fraudulent refunds being claimed;
then let's make it difficult to claim the refund.
A possible solution would be to change the law and extend the
period before interest is payable to six months, for say, the first
three refunds claimed by a vendor – this will give SARS
sufficient time to validate refunds, while not being penalised by
having to pay interest. Or, for vendors that have intermittent
refunds (that is, in most periods they should be a net pay-in
position), treat a refund as an 'assessed loss' to be
carried forward to the following period.
This will means that vendors that are usually in a net pay-in
position won't have a hassle when trying to make good on their
tax obligations. Let's be practical, let's make it easy to
contribute our fair share of tax.
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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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