PwC’s 2023 Taxing Times Report shows that the South African Revenue Services (SARS) still has a long way to go in regaining the trust of corporate and business taxpayers – which may prove a daunting task as it comes under increasing pressure to boost revenue.
The report is based on a PwC survey of corporate taxpayers in the country that aims to assess their recent encounters with the taxman, focusing on both the achievements and areas that could be improved and enhanced in future tax seasons.
SARS has been making a big show of improving its systems and technologies to boost tax compliance in the country, and has consistently carries the message that it wants to make paying tax easy and accessible while also making non-compliance costly and high risk.
What the survey results found, however, is that the revenue service has fallen short in a few key places when it comes to dealing with corporates – while it hasn’t managed to improve levels of trust between taxpayers and the authority in any significant way.
“We asked participants if their trust in SARS had increased in the last 12 months, and 42% (45% in 2022) said it had, while 58% (54% in 2022) said it had not,” PwC said.
“This is a critical issue that SARS must address, since rebuilding trust will eventually translate into restored public confidence, increased tax morality and ultimately the payment of tax, which our country sorely needs to fulfil our fiscal budget.”
According to survey respondents, some of the trust issues with SARS derive from a lack of knowledge by staff at the group, which one corporate taxpayer said has a “massive impact on the trust we have in SARS”.
Another issue is that even though the tax service is conducting more audits (a positive thing), there are still inefficiencies – such as the call centre – and other operations that causing delays.
In fact, one of the biggest pain points measured in the survey had to do with turnaround times. 71% of respondents indicated that SARS was simply not complying with the times specified in its own service charter. While this was an improvement from 2022 (78%) and 2021 (86%), it’s a far stretch from the more positive responses seen in 2018-2020.
To SARS’ credit, corporates and businesses are finding it easier to be tax compliant, however. 51% expressed positive sentiment towards the statement, an eight percentage point improvement from last year.
However, this still implies that around half of all corporate taxpayers are still finding it a challenge.
In line with running commentary from tax specialists throughout the latest tax season, corporates have noted increased aggression from SARS when it comes to things like chasing understatement penalties.
According to PwC, SARS needs to ensure that the percentage of the penalty imposed matches the appropriate behavioural category as outlined in section 223 of the TAA.
The Letter of Assessment must make clear reference to whether SARS has raised USPs and under which category of behaviour. The onus is on SARS to prove that the taxpayer’s behaviour justifies the imposition of the USP imposed, PwC said.
“Similar to the previous year’s survey results 47% (45% in 2022) of participants indicated that they ‘Strongly Agree’ that SARS is aggressive when levying USPs. 34% (38% in 2022) of participants indicated that they ‘Somewhat agree’ that SARS is aggressive in raising USPs. Only 6% indicated that they