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South Africa Puts Tax Compliance As Priority

by Lorys Charalambous,, Cyprus

28 May 2013

In their parliamentary speeches regarding the vote on South Africa's 2013 Budget, both Finance Minister Pravin Gordhan and Deputy Finance Minister Nhlanhla Nene stressed the priority the National Treasury is giving to an improvement of tax administration and compliance.

Gordhan looked to a modernization of the tax administration leading to necessary base broadening and a reduction of compliance costs as the automated tax clearance certificate system rolls out, while Nene focused on closing domestic and international tax loopholes.

Gordhan pointed out that a new tax administration system has been established since 1994 in the South African Revenue Service (SARS), and that "the overhaul and modernization of the tax structure and administration has allowed tax rates to be lowered alongside broadening of the tax base."

He specifically mentioned, for example, that modernizing and automating the corporate income tax system for companies is well advanced, with the automated tax clearance certificate system and the new income tax return for companies, which will both reduce compliance costs through simplification, being operational this year.

On the other hand, Nene concentrated on the "crucial role" that SARS has in collecting the funds required for South Africa's development needs. For the 2013-14 fiscal year, SARS is now required to collect ZAR898bn (USD94bn) of tax revenue, which is nearly 10 percent or ZAR84bn more than was collected in the previous year, which had itself been 9.6 percent higher than actual collections in 2011-12.

He complained, however that meeting that target would not be easy, particularly "because of corporates and wealthy individuals who organize their affairs in such a way that they do not pay their fair share of tax. They achieve this through sophisticated tax avoidance and evasion schemes."

He confirmed that SARS should extend its global agreements on the exchange of tax information to more jurisdictions, and use its powers in the new Tax Administration Act "to detect and deter non-compliance, including stiff penalties for those who are willfully non-compliant."

SARS is, for example, to focus on increasing the use of mobile technology to allow taxpayers easy and convenient access to services wherever they are; reviewing its branch footprint to better reach taxpayers and traders; developing a single registration process for businesses and traders to reduce the costs of tax and customs compliance; and bringing all economic activity within its purview even when there is no revenue to be derived. That would include having sight of all informal businesses.

TAGS: individuals | South Africa | compliance | Finance | tax | business | tax information exchange agreement (TIEA) | tax compliance | tax avoidance | corporation tax | tax authority | agreements | revenue statistics | penalties | individual income tax | services | Africa

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