Lifeline for taxpayers in South Africa – tax experts say you should grab it

The South African Revenue Service (SARS) has continually granted a lifeline to non-compliant taxpayers by keeping the Voluntary Disclosure Programme (VDP) open, which allows non-compliant taxpayers to come clean, says Tax Consulting SA.

According to the tax consulting firm, many practitioners and taxpayers remain unaware and uncertain about VDP despite it being available since 2011.

The VDP is an open-door approach implemented by the revenue service, enabling taxpayers to rectify their tax issues by voluntarily disclosing any defaults in tax payments or non-compliance that could result in penalties or enforcement actions if discovered by the revenue service.

A recent webinar with Tax Consulting South Africa and the South African Institute of Taxation (SAIT) highlighted that many are unknowingly staying on their “sinking, non-compliant ship”.

The lifeline

Tax Consulting SA said the programme allows for the disclosure of underdeclared income or understatement of any tax liabilities – regulated by the Tax Administration Act.

VDP implementation forms part of the tax authority’s strategic objective to provide for easier compliance, said the group.

Tax Consulting SA said, however, that there are legislative requirements that one should meet to benefit from VDP, one being – ensuring you are a registered taxpayer with SARS and are up to date with tax filing obligations.

Once you have met such requirements, you can reap the benefits of a VDP agreement with SARS, including:

• Confirming the disclosure and what it relates to;
• The waiving of any penalties that may have arisen from the default, except in instances of gross negligence and intentional tax evasion;
• The confirmation of the payable amount and date it is due;
• The granting of full immunity from criminal prosecution in respect of the default disclosed:

Polls from Tax Consulting SA’s recent webinar found that many people are not seeking the VDP route, with 60% of respondents indicating they have a small number of clients with under-declared or undeclared income, only 5% said they have proceeded with the VDP in these instances.

“Concerningly, only 83% of attendees stated that they have only followed the VDP route in a few cases, and not for all their non-compliant clients,” Tax Consulting SA.

The table below shows the responses from practitioners:

43% of attendees said that navigating communication and integration with SARS is the aspect of the VDP process they are most concerned about.

“Other attendees (23%) noted that it was the gathering and organizing of the necessary documentation for the application,” said Tax Consulting SA.

Tax Consulting SA said that SARS is continuing its strict scrutinization of non-compliance, and it is important for taxpayers to grab the lifeline offered.

“With tax season opening on 7 July 2023, taxpayers should seize this opportunity to come clean before it’s too late and being left in the icy abyss of non-compliance without an option of evacuation/rescue,” said the tax firm.

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