Tito Mboweni announced during the latest budget speech on 20 February 2019 that there will be a revenue shortfall of R42.8 billion during this fiscal year. This announcement was made before the series of stage 4 load shedding that is currently crippling the country. The reality is that SARS will most likely not even be able to raise the budgeted revenue during the fiscal year due to lower profits from corporations directly caused by reduced productivity as a result of the current load shedding.
SARS is currently campaigning in various forms of media that the deadline for submission of outstanding returns and payment of outstanding debt is 29 March 2019. After this deadline, they are going to start taking action against tax payers with outstanding balances on their tax accounts. This includes raising interest on outstanding amounts. SARS also has the right to take money from a taxpayers bank account for money owed to them.
Not paying outstanding taxes, is a criminal offence, and SARS has various legal means at its disposal to collect outstanding taxes.
Available avenues to recover debt include:
- Collecting debt from third third-party appointments, such as employers, banks or customers.
- Issuing a judgment and having your name blacklisted.
- Attaching and selling your assets.
- Obtaining a preservation order in respect of your assets.
- Liquidating or sequestrating your estate.
- SARS can even obtain an order to repatriate your offshore assets to SA, and in the interim restrain your right to travel.
Employers are soft targets for raising extra tax
By targeting payroll to raise additional tax, SARS is creating an easy avenue to collect large sums of tax from a single taxpayer. When employers miscalculate payroll taxes, SARS will recover the under payment of taxes from one entity (the employer), as apposed to the individual taxpayers themselves.
A small calculation error for a number of employees, can result in a large amount of tax payable to SARS on under-declared taxes. Inexperienced payroll administrators may not know fully know or understand the law, which can lead to under-declared taxes. Once an employer’s payroll becomes a little more complicated, chances are SARS will very likely find something. Reality is that most employers will only become fully compliant once they have gone though the nightmare of a payroll audit by SARS.
Incorrect interpretation of payroll data by SARS?
Being audit by SARS is a stressful, time consuming experience for anybody involved. In stead of identifying specific errors on the employer’s payroll, SARS is focusing on the cost of employment on the employer’s financial statements. SARS is looking for discrepancies between the employer’s payroll reconciliation and the cost of employment figures as reflected on the Annual Financial Statements.
Truth of the matter is, there are more likely than not amounts included in the employment expense that are not processed to the payroll. Some employers may use independent contractors that is not employed by the employer, but my still form part of the cost of employment figure on the financial statements. Payments to the WCA does not form part of the payroll reconciliation, but is included in the cost of employment.
It should be clear that not all expenses included in the cost of employment forms part of the payroll reconciliation. The onus is however placed on the employer to explain the difference and why it is not taxable in the employees’ hands. This can be a long process as SARS will not back down until they are happy with the explanation and relevant supporting documentation.
Fully compliant payroll
The fact that SARS is increasingly targeting payroll taxes as an easy avenue to collect additional taxes, should have the alarm bells ringing. An ask for forgiveness rather than permission approach with SARS is strongly advised against. SARS rarely forgive and forget.
The defense against an unwanted payroll audit by SARS, is to use professional payroll administrators to handle your payroll needs. Alternatively, you should have your payroll independently audited to ensure you are compliant before SARS decides to do so.
This will minimise the chance for future audits by SARS, and if any errors are detected by the independent audit, they can be disclosed via SARS’ Voluntary Disclosure Programme. A small investment now can save you lots of money and headache in the future.