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‘Profoundly good work’ from SARS


The recent reform of the PAYE tax dispensation by South African Revenue Services has been hailed as a “profoundly good piece of work”.

Laying down specific requirements for both employers and employees, the way the new dispensation is structured has major impacts. “The primary objective is to ensure that life becomes much easier for honest taxpayers and much more difficult for dishonest taxpayers and tax evaders,” says Grant Lloyd, MD of payroll software developer Softline Pastel Payroll.
The overall process will be more streamlined, enabling returns to be submitted more quickly and more accurately which in turn will facilitate quicker processing by SARS and quicker settlement of amounts owing to taxpayers who have paid more than they need to. Lloyd says companies with automatic payroll software will also find the new dispensation very easy to accommodate.
“SARS has really put a lot of thought into the new dispensation and the streamlining of the process. It is a profoundly good piece of work and I see it as the important first leg of an overall conversion to a totally electronic taxation system along the lines of the one that has proved so successful in Australia.
“By raising the personal tax earnings threshold for no return required to R120 000 a year, SARS is also reducing the total of returns to be processed by some 800 000 individuals,” adds Lloyd. “While these people still have to register with SARS and pay PAYE every month, they are not required to submit a formal annual tax return, thereby decreasing overall tax assessment traffic and helping to speed up the process for those who do have to submit.”
With the individual tax return submission “filing season” this year reduced to just seven weeks (1 September to 21 November) for manual submissions, SARS  is encouraging people to convert to electronic returns by allowing eFiling system users another six weeks until 23 January 2009 to make their submission.
A dynamic single tax return for individuals which will be customised and pre-populated with verified IRP5 and IT3A information received from employers will result in accurate returns that are much easier to complete.
Lloyd says that tax returns will be provided by SARS on request, encouraging people to use eFiling. The forms are a standard two pages and by answering the questions and entering only relevant information, each becomes tailored to the individual’s circumstances.
If an individual’s only source of income is his job, the form is extremely simple and straightforward. However, if the person has other sources of income such as investments or receives rental income from properties owned, then the form is customised accordingly.
A “nice touch” from SARS, according to Lloyd, is that it now also offers a facility to fill in the tax return form off-line which ensures that no data is lost if a power failure or other internet connection failure occurs.
“Taxpayers probably have two to three years to phase out of submitting paper returns manually. A service that will encourage people to make this migration is the SARS free software that allows tax certificates to be captured electronically or printed out and submitted manually. This clearly demonstrates that electronic is more effective and time-efficient.”
While offering taxpayers a choice of language for submission could pose some challenges in the processing of returns, Lloyd says SARS has obviously done its homework well and the new system will also offer benefits to accountants and tax practitioners.
“The pre-populated returns will reduce the manual workload for tax practitioners and result in fewer transcription errors. The new tax calculator that can be used to calculate the assessed liability upfront will also save time and effort,” says Lloyd.
“Overall, the new dispensation should also create new business opportunities in servicing employers that do not have the skills set to electronically complete the new EMP501 or electronically capture tax certificates.”