SARS Digital Transformation
At SAIPA’s 2023 Accounting iNdaba, industry leaders explored the impact of digital transformation on tax returns in South Africa, particularly with the introduction of auto assessments by the South African Revenue Service (SARS).
The humble tax return is undergoing a profound transformation, propelled by the relentless progress of technology. In the midst of this paradigm shift, the South African Revenue Service (SARS) has implemented auto assessments, raising questions about the redistribution of risk between tax authorities, taxpayers, and tax practitioners.
Shifting the Burden or Enhancing Efficiency?
Ettiene Retief, Chairman: SAIPA Centre of Tax Excellence, sees the transfer of risk by SARS not as a burden shift but as an enhancement in administrative efficiency. He emphasises that the responsibility for filing, disclosing, and ensuring accuracy has always resided with the taxpayer.
“SARS, by leveraging available tools and data, aims to improve its efficiency in pinpointing issues and non-compliance. While there may be a perceived shift in risk, the fundamental responsibility for tax affairs and proper disclosure has consistently rested with taxpayers themselves.”
Evolution of Processes and the Critical Role of Data
Retief traces the evolution of processes, emphasising the transformative impact of eFiling and similar technologies. He highlights the central role of data, stating that it stands at the core of this transformation, poised to become the most fundamental aspect for both practitioners and tax-related processes. “I’m aware that opinions on auto assessments vary, with some embracing it and others expressing reservations.”
“However, a key takeaway from auto assessment is the observable shift in the number of returns being filed without the need for proactive pursuit of the taxpayer.” Retief states.
Evolution of Processes and the Critical Role of Data
Retief traces the evolution of processes, emphasizing the transformative impact of eFiling and similar technologies. He highlights the central role of data, stating that it stands at the core of this transformation, poised to become the most fundamental aspect for both practitioners and tax-related processes. “I’m aware that opinions on auto assessments vary, with some embracing it and others expressing reservations.”
Mark Kingon, Stakeholder Relations at SARS, provides historical context to the concept of auto assessment, dating back to 2008, and notes that the value practitioners bring extends far beyond the scope covered by auto assessment. “SARS cannot afford to have long queues extending around blocks, necessitating manual filling of forms. The goal, through digital transformation, is to alter this behaviour so that people no longer must spend a day waiting in queues to submit a return when it can be seamlessly provided,” Kingon states.
Addressing Risks and Abuses in the Realm of Donations
Retief and Kingon then tackled specific challenges relating to Section 18A deductions, addressing risks and abuse in the realm of donations. “While auto assessment aids in reducing volumes, it’s essential to acknowledge that mistakes can happen”
“It is a progressive journey, and it is important not to view it negatively, but rather as an opportunity to provide greater value to clients.”
On the subject of sec 18A, this is an area where there is the risk of abuse. “The shift involves acquiring data through certificates, allowing for pre-population into the return, as opposed to the traditional approach of post-validation that corrects discrepancies afterward. However, this places the responsibility on compliant nonprofits, which will become an integral part of the business process for 18A organisations seeking donations, and accordingly the cost of compliance, which is an unavoidable aspect in any case,” Kingon explains.
Automation for Compliance and Increased Customer Base
Khanyisa Cingo-Ngandu, Head of Tax at SNG Grant Thornton, advocates for embracing automation for the benefit of compliant taxpayers. She sees automation as not only simplifying compliance for willing taxpayers but also enabling revenue authorities to target those who are reluctant to comply.
Adapting to Changes: Challenges and Opportunities
Hein Pretorius, a Professional Accountant, identifies a challenge for older practitioners in adapting to new technology, indicating a likely need to force this change to ensure a smooth transition.
Firdoze Abdool Sattar, Associate Director at Deloitte Africa Tax and Legal, sees a broader challenge in the mindset shift and ensuring that companies have the necessary budget for evolving tax functions, which will require the integral role of tax in organisational transformation to be redefined.
“The challenge lies in persuading large organisations to recognise that the responsibility for tax compliance is a collective responsibility of the entire organisation.”
“Integrating tax considerations into the broader transformation will be essential, particularly when implementing new SAP or Oracle systems. Neglecting tax in these technological shifts will lead to noncompliance issues, especially with the increasing emphasis on real-time reporting,” Abdool Sattar notes.
The Challenge of Industry-Wide Transformation
The discussion shifts to the challenge of data management within various industries, while exposing the complexity in transforming existing setups to accommodate shifts in tax considerations. The panel agrees that there is a need for a standardised and comparable set of data for analysis, while acknowledging industry-specific challenges in diverse sectors.
Moving forward, ensuring the comparability of data will be critical, especially for large organisations where the focus must be on developing a system that fosters comparability between tax and accounting data. Here, it will be important for SARS to engage with taxpayers to verify that reports drawn from the data reflect the true state of the business Kingon says.
“As a profession, we need to proactively stay ahead, ensuring the correctness of the data set so that SARS can seamlessly implement changes. It’s a matter of adopting a proactive approach, akin to putting the horse before the cart, to ensure a smooth transition and compliance with historical tax obligations,” Retief asserts.
Collaboration for a Seamless Transition
Kingon conveys SARS’ commitment to collaborating with industry stakeholders to co-create data interface specifications. He mentions the importance of clear data specifications to ensure industry participants are well-prepared for implementation when the time comes, encouraging joint effort in addressing likely challenges related to e-invoicing, cybersecurity threats, and concerns around data sharing.
Fostering Trust and Recognising Compliance Efforts
Retief speaks to the delicate balance in the current compliance landscape, where taxpayers oscillate between fear and frustration, advocating for a shift in the narrative from avoiding punishment to acknowledging and rewarding compliant behaviour. In response, Kingon outlines SARS initiatives that aim to provide a gold standard for exemplary clients and differentiate treatment based on compliance levels.
