In announcing improvements to the filing process for 2008, SARS stated that it has made a commitment to continually improve service to taxpayers whilst strengthening the overall integrity of the tax system.

In 2007, enhancements were made that sought to provide better service to taxpayers and improve SARS’s ability to detect non-compliant behaviour earlier.

For 2008 further changes will be introduced that will focus on the legal obligation of employers who administer payroll taxes – PAYE, SITE, UIF and SDL.

These changes will affect the way in which employers submit their annual PAYE declarations to SARS which must reflect deductions made from the salary of employees and whether these have been paid to SARS on behalf of employees.

It will also affect the way companies issue IRP5 certificates to employees for a particular tax year and the traditional way in which individuals receive, complete and submit their annual tax returns to SARS.

SARS says that these changes will be introduced to make filing a tax return easier for individuals, and to provide companies with free, convenient software for automated payroll reconciliations as well as technical assistance.

SARS implemented the first phase of the PIT reform programme in 2007 with changes to the income tax return process:

• The tax return was redesigned, simplified and reduced to 2 pages;
• Taxpayers did not have to submit supporting documents to the return;
• SARS applied electronic 3rd party data verification of information the taxpayer provided;
• Returns were scanned and assessed through an automated process for faster turnaround times;
• A sophisticated risk engine was developed to detect non-compliance.

The changes for 2008 and the focus on employers are the second phase of SARS’s PIT reform programme. It also contributes to the important policy objective announced by the government, to expand social assistance through the introduction of a wage subsidy and social security to all working South Africans.

The ultimate aim for SARS remains to present the majority of individual taxpayers with a pre-populated tax return by transforming the PIT process.

The eventual goal is to switch to a return-free system for the majority of salaried individual taxpayers, in which their tax liability is calculated using electronic data supplied directly to SARS by 3rd parties and is reflected in a tax account sent to the taxpayer.

For employers, these changes will mean that they will have more time - until 30th June, 2008 - to prepare for these changes. Companies then have a 60 day window period – 1st July 2008 to 29th August 2008 - to submit employer PAYE deductions to SARS.

Employees cannot receive or submit their tax returns to SARS until employers complete their PAYE declarations to SARS.

SARS will provide all employers or companies with computer software that can reconcile the deductions they made from employees’ and what companies paid to SARS, free of charge.

The payroll information from employers to SARS will allow SARS to issue the majority of taxpayers with a pre-populated return that already contains the income they have earned. However, SARS warned employers that do not comply by 29th August, 2008, that they will face "strong penalties."

For individuals, the filing period for returns will open on 1st September, 2008. Individuals must request a return from SARS from this date. The deadline for paper returns will be 21st November, 2008, and for electronically filed returns 23rd January, 2009.

Certain individuals with income below SAR120,000 per year year and who have a single employer and source of income, and who meet certain criteria will not have to complete and submit a tax return to SARS, as their details and income stream will be automatically captured by the new process.