The South African Revenue Service (Sars) is hoping that by reducing a normal salaried taxpayer’s tax return from 10 pages to two, more people will submit returns and less will require a tax consultant.
However, as one tax consultant puts it, “a simpler tax return form does not simplify tax”.
Ironically, the fact that taxpayers no longer need to submit supporting documentation could actually be to tax consultants’ benefit.
André van Staden of Exord Payroll Solutions, who receives the bulk of his business from ordinary taxpayers, says many taxpayers are not good at keeping their own tax receipts and a major part of his role is record-keeping on behalf of clients. “The fact that Sars will no longer be filing the documentation makes record-keeping even more important,” he said.
While individuals will no longer need to send in supporting documents such as an IRP5 or log book details, they will need to retain these records for five years in case of an audit.
As part of the simplification process, taxpayers will not have to do their own calculations, as this will be done for them by Sars. They will just have to input the information. However, there are taxpayers who would rather have a consultant double-checking Sars’s calculations. Having a tax consultant provides them with a sense of comfort.
Van Staden says that, when Sars introduced eFiling last year, only one of his clients decided to do his own tax return: “A simpler form doesn’t mean you understand the whole principle, you still have to have the confidence to know what you are doing.”
The major benefit will be for Sars, which is facing a drastically increasing workload. The tax register base has grown on average between 8% and 12% a year since 1994. In the 1997/98 tax year, there were 2,7-million registered taxpayers compared to more than five million today. This is expected to reach 10,5-million by 2010.
Sars has to find more effective ways of managing tax returns. In some ways this new format is moving closer to the Swedish tax system, which Sars Commissioner Pravin Gordhan is known to admire.
In Sweden, taxpayers receive an already completed tax return from the tax man which they can just sign off or dispute. At the press conference, Gordhan said that Sars will be looking to rely more heavily on third-party verification. In other words, employers, banks, insurers, medical aids and fund managers are all required to provide Sars with tax information on individuals. A time will come when that process is so efficient that Sars will not even need the individual to declare their taxable income.
There is also a drive to encourage people to complete the information electronically. eFiling has been made more accessible and, for taxpayers who prefer to keep a hard copy, they will be able to download a tax form from the website that can be completed on the computer, printed and sent to Sars. This will carry a 2-D barcode and all captured information will be contained in the barcode, enabling Sars to simply scan the document for all information to be captured electronically. Anyone who goes into a Sars branch to complete their tax return will have it completed electronically. With less capturing and filing needing to take place, Sars will be freeing up manpower to go after non-tax-compliant individuals. The new tax forms will be issued from July 15 and need to be returned by October 31.