A new computer system will allow the revenue service to harvest more taxes, writes Belinda Beresford
The tax collector is quietly setting traps to catch those modest South Africans too shy to reveal their full income.
The phone call interrupting supper could be a polite revenue service reminder that your tax return is overdue, or that “the cheque has been in the mail” for a month and it might be time to send a replacement.
That new car might not seem so attractive once you discover that the licencing department’s computer is talking to all sorts of fellow databases, the tax office’s among them.
With the new number plate goes a message to the tax office letting it know just how much you’ve spent. This could result in another polite phone call asking just how you managed to finance such an expensive car.
Eventually, registering for a telephone or paying your rates could expose you to the searching gaze of the tax service as your local council’s computers reveal what kind of neighbourhood you are living in.
Even sending your money overseas may not be safe, as tax treaties with other countries could allow the South African Revenue Service (SARS) access to your foreign financial details.
The service’s new computer system is an ever- expanding net to haul in unwary taxpayers – or non-taxpayers.
Expected online by January, the new system will cause many an unhappy New Year as it collates information from an array of government departments and private sector databases.
Initial links are likely to be with employers, other government departments and banks.
Financial institutions already have a legal obligation to tell the SARS of interest payments. But from next year, the present haphazard system of forms will be replaced by an automated network of computers which will alert the revenue service not only to tax obligations but also to financial discrepancies.
The government granted the SARS “operational autonomy” last year in an attempt to boost its efficiency and to allow it to pay market-related salaries for increasingly scarce, and expensive, accountants.
It has also introduced a bonus incentive scheme. If collections exceed targets, revenue staff are paid a percentage of the difference.
In its transformation drive, the SARS has employed a number of methods to remind errant South Africans of their duties as taxpayers. To broaden the tax base, inspectors have been walking the streets and checking whether businesses are registered for tax.
As the SARS launched this campaign last year, the service’s representative, Christo Henning, said it was making diligent use of telephone books and advertisements in newspapers.
“If you advertise, you’re likely to get a visit, so from our point of view it pays to advertise,” he said.
Such techniques netted the SARS more than 420 000 new taxpayers in the past financial year, bringing the total to more than 5,3-million.
There are estimated to be more than 10- million gainfully employed South Africans, many earning below the tax threshold.
The service intends to continue broadening its tax base until the estimated 1,5-million “clients” currently slipping through the net have been caught.
Henning says the SARS is trawling right across the economic spectrum, from doctors working at home to taxi drivers and small private businesses.
Even street hawkers are checked on because often “they have someone behind them making major bucks, even though the person on the street may be making a hand-to-mouth living”, Henning said.
The SARS is undergoing a transformation, both internally and externally. Henning says an integral part of this transformation is promoting communication between clients and the tax service since “people would rather talk to their dentist than the receiver”.
According to the SARS, the law already makes provision for the service to collect information – the real difference is going to be an increase in the speed and efficiency of the operation.
“One of the things we always get into trouble about, we force people to submit returns but then don’t assess them. [We] want to reduce the turnaround from six months to about a month”, said one SARS employee.
During discussions with the revenue service, taxpayers will receive statements of the activity in their account so they can reconcile on a monthly basis the tax paid, tax owing and how their assessments are going through. People may also be able to apply for extensions via the Internet.
In a report to Parliament last week, the revenue service said it is quite pleased with its performance. For the past three financial years it has reached its collection targets.
In its presentation, the SARS said that in the past financial year tax collections totalled just more than R160-million, slightly more than 26% of gross domestic product. This compared to just less than R143-million in the 1996/97 tax year.
The SARS also claims to be more efficient. Collection costs were 0,76% of the total revenue in 1997/98, compared to 0,87% the previous year.
While increasing the taxpayers on its books by 12,4%, the SARS has also overseen a fall of just less than 9% in outstanding tax returns.
Errant taxpayers face stiff penalties. Those who under-declare their income face a fine of double the unpaid taxes on top of the outstanding amount.
The tax service still has extensive powers to probe your affairs. Inspectors can demand financial records and statements, and have the authority to seize assets if co-operation is not forthcoming.
As yet, they do not have the power of arrest but it is being mooted in some quarters.
In future your identity number may also become your tax reference number, raising the prospect of the taxman watching you from cradle to grave.
For an increasing number of South African’s, the days of avoiding the tax service will become a thing of the past, which is good news for tax advisers, as people will undoubtedly turn to more legal methods of minimising their tax bill.