It is without doubt that the age of technological advances lends itself to automation. One such automation is the proposed SARS Income Tax Return automation. It makes perfect sense that many parts to the Individual Income Tax Return can be tied up to third parties and pre-populated. Integration is the buzz phrase and it is welcome.
However, an automated assessment? A lot goes into the current process from the time of first creating a return – to the final lodgement and awaiting the Assessment from SARS. More specifically the role of the current Tax Wizard must not be underestimated. Perhaps this process is not fully appreciated or understood, or perhaps SARS need to communicate how easy it will be to challenge an auto-assessment?
When one thinks of SARS’ target audience, all those below the Tax threshold and the admin linked to their tax returns – integration and automation will bring down the staff commitment required of SARS. A good thing. However, these taxpayers contribute little to the Taxes collected by SARS. It is the age old eighty-twenty rule. For such persons, they should not need to even submit returns as in most cases, their employers have deducted the relevant taxes monthly through payrolls.
It is the taxpayers with more income and often more complex profiles that generally carry the tax burdens. One simply needs to cast an eye over all the questions in the Tax Wizard (which is at the start of the Income Tax Return) to appreciate how complex it can become. In these cases, an auto-assessment seems challenging.
A person qualifies for exemption for being 183 days or more outside of the country, sells a home or property, has qualifying medical expenditure that will reduce assessed tax for the year, is part of more than one payroll in the year and EMP501s have not been issued by both employers. There are many specific scenarios out there and one shoe does not fit all taxpayers. These variations can render an auto-assessment incorrect.
The challenge is the aftermath of an auto-assessment that needs to be dealt with…
I would expect taxpayers who do not agree with the auto-assessments to have to dispute these and possibly even challenge system generated interest and penalties…set in a context where communication is often problematic. In the event that the auto-assessment is incorrect, and not communicated to taxpayers… a mess could ensue.
If the dispute process is similar to the current process, most people will need to hire tax practitioners to assist. Tax returns will become costly and more onerous, if not prescriptive. An auto assessment penalizes the person who does his existing returns correctly and has his support documents pack ready and waiting for submission. That same person often uses the SARS calculator to ensure his taxes are correctly recorded. Auto-assessment does not give you that chance – the machine does its own thing…
In light of this and the potential teething issues, an easier approach to disputes will hopefully be available in the new system. With tax season to be opened 1 September 2020, we hold our breath and hope for a smooth transition.
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