Elle-Sarah Rossato | Partner | Tax Controversy and Dispute Resolution | PwC South Africa | mail me |
The South African Revenue Service (SARS) has marginally improved refund payment time frames, but it needs to prioritise improving service delivery and building trust with taxpayers.
In his recently delivered Medium-Term Budget Policy Statement (MTBPS), Finance Minister Enoch Godongwana announced a tax revenue shortfall of R22.3 billion.
Every year, we assess how easy and efficient it is for corporate taxpayers to comply with their tax obligations. We do this through our Taxing Times Survey.
SARS improvements
Based on survey feedback, it is clear that SARS’ nine strategic objectives are paying off. Improved technology and better debt collection efficiencies have contributed to SARS’ 2023/24 record collections of R1.7 trillion.
The strategic objectives are as follows:
- Provide clarity and certainty for taxpayers and traders of their obligations.
- Make it easy for taxpayers and traders to comply with their obligations.
- Detect taxpayers and traders who do not comply, and make non-compliance hard and costly.
- Develop a high-performing, diverse, agile, engaged, and evolved workforce.
- Increase and expand the use of data within a comprehensive knowledge management framework to ensure integrity, derive insight, and improve outcomes.
- Modernise systems to provide digital and streamlined online services.
- Demonstrate effective resource stewardship to ensure efficiency and effectiveness in delivering quality outcomes and performance excellence.
- Work with and through stakeholders to improve the tax ecosystem.
- Build public trust and confidence in the tax administration system.
In this report, we reflect the sentiments of 206 corporate taxpayers across 17 industries who participated in the survey. This edition, which is the seventh in the annual series, was conducted from May to July 2024.
Enhanced experience
The latest findings from our Taxing Times Survey 2024 indicate that nearly half (46%) of taxpayers disagree that it has become easier to comply with tax obligations. Half of the participants felt that SARS’ service delivery had improved. Meanwhile, 42% said their VAT verifications were completed within 21 days. A majority (62%) received their refund within this timeframe, a 2% increase from 2023.
The purpose of the report is to annually assess the experiences of corporate taxpayers with SARS. It highlights their notable achievements and areas for improvement.
We explore whether taxpayers feel that SARS is succeeding in making tax compliance straightforward. We also examine whether SARS is effectively detecting and addressing non-compliance. Additionally, we analyze how well SARS is managing its processes and people. We assess if it is fostering a high-performing workforce and whether its modernization efforts are simplifying the tax process.
Beyond measuring taxpayers’ experiences, our survey holds SARS accountable to its strategic objectives. It ensures that taxpayers’ experiences reflect the efficiency and fairness that should characterize a robust tax system.
This year’s survey focused on the following key areas:
- The audit process: corporate income tax (CIT), value-added tax (VAT), and transfer pricing.
- Disputes and the debt management process.
- The Voluntary Disclosure Programme (VDP) process.
- SARS’ service delivery.
Key findings from the 2024 survey
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Likelihood of being selected for verification
33% of participants believe it is ‘extremely likely’ that they will be selected for verification, compared to 53% in 2023. Additionally, 42% said they are ‘somewhat likely’ to be selected, resulting in a total of 75%, compared to last year’s 85%.
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Time to finalise a verification process
As in last year, 48% of participants indicated that their CIT verifications take between one and three months to finalize. Eight percent of participants reported an extended turnaround time of 12 months or longer. This is up from 3% in 2023 and 17% in 2021, showing a decline in SARS’ efficiency.
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VAT verifications
This year, 42% of participants said their VAT verifications were completed within 21 days, compared to 40% in 2023. However, 2% said their verifications took more than 12 months to complete.
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VAT refunds
62% of respondents said SARS had released their VAT refund within 21 days. However, 38% said SARS did not make the payment within this time or only did so after follow-up inquiries. Despite this, there is a steady improvement in SARS’ refund time frame, and we hope this trend continues.
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Disputes and debt management process
SARS’ debt management function is used when there is no dispute or based on the “pay now, argue later” principle between a taxpayer and SARS.
Raising a dispute does not automatically suspend the obligation to pay the liability in SARS’ assessment. This year’s results show that 39% of participants had their request for suspension of payment accepted, a 4% decrease from last year. Twenty-four percent of participants said SARS rejected their request for suspension without adequate reasons.
The feedback from taxpayers reveals areas where SARS can make meaningful improvements. However, it is notable that SARS is making steady progress. For the 2024 filing season, SARS auto-assessed five million taxpayers with a 98% acceptance rate. This demonstrates the revenue service’s commitment to making tax compliance easier.
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VDP
Through the VDP, SARS allows taxpayers to voluntarily disclose prior tax defaults and fully disclose their tax affairs. The VDP offers protection against criminal prosecution and relief from certain penalties. It is also a valuable revenue collection tool for SARS. As of April 2024, SARS had finalised 1,435 VDP applications, contributing R3.5 billion in revenue.
This year, 29% of participants used the VDP process, down from 35% in the previous year. This decline is concerning for SARS’ compliance efforts. However, 43% of participants said their VDP application was finalised within three to six months, a 10% increase compared to last year.
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SARS’ quality of service
We asked participants if they believed the quality of service delivered by SARS had improved since the introduction of the SARS Service Charter in 2018. A 6% decrease from 2023 was noted.
Only 3% of participants ‘strongly agree’ that SARS’ service delivery has improved, while 47% ‘agree’. This is a 3% decrease compared to last year, indicating general dissatisfaction with SARS’ service delivery.
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Compliance with tax obligations
An aggregate of 54% of taxpayers indicated that it has become easier to comply with tax obligations, a 3% improvement from last year. However, 46% of participants ‘disagree’ or ‘strongly disagree’. This suggests that almost half of participants still find compliance challenging, possibly due to complicated SARS systems or processes.
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Trust in SARS
In the last 12 months, 46% of participants said their trust in SARS had remained the same. This stagnation indicates that SARS must continue its efforts to improve taxpayer trust. Restoring public confidence will increase tax compliance and ultimately contribute to the country’s fiscal budget.
Our survey is more than just an annual exercise. It is a critical lens through which we assess whether SARS is living up to its promise of efficiency, transparency, and trustworthiness. The feedback gathered serves as a vital barometer of SARS’ performance, particularly in its efforts to modernize systems, engage stakeholders, and build public trust in the tax administration system.
– Jadyne Devnarain, Associate Director at Tax Controversy and Dispute Resolution at PwC South Africa.
