Many accounting/auditing firms seem to have noticed the increase by SARS in audits and additional assessments, especially following the repeal by SARS of the IT14SD. But what is more, is that the quality of SARS’ audits and the quality of their additional assessments seems to be improving. Given the increase in the quality of their assessments, it is not as easy as it once may have been to deal with additional assessments, let alone dealing with the sheer volume of additional assessments being raised.
If you’re struggling to cope with all the SARS audits, this blog is for you.
But why? What changed? The SARS commissioner was recently quoted as saying that SARS is not in favour of an increase in the tax rates, nor for the introduction of a wealth tax. Rather, said the Commissioner, they will focus on what he calls “compliance dividends”. Our take on the meaning hereof – they are going to make sure to collect taxes and meet targets by squeezing the existing tax base for compliance.
Now, as soon as one mentions the fact that SARS is going to force compliance, one tends to think of SARS focusing on what may be labelled “tax dodgers”. The last thing you think about is your client who duly files tax returns and pays their taxes (let’s label these guys “your apparently compliant client”). However, it appears that in addition to focusing on the “tax dodgers”, SARS is very much focusing on your apparently compliant clients and, with a fairly high level of accuracy, finding them wanting.
An additional assessment means additional tax (or reduction in refunds or assessed losses) and the very popular Understatement Penalty. More tax (together with a penalty) makes reaching collection targets easier. If that additional assessment is overturned at objection level, collection targets move further out of reach again and making it up in an already struggling economy cant be easy. So, you tend to get resistance from SARS when you take them on, (more so than perhaps you did in the past). Condonations are getting more and more difficult to get through and objections are more likely to be disallowed, forcing the aggrieved taxpayer on appeal.
Why? The quality of assessments is getting better. The Tax Ombud, not so long ago, found that roughly 94% of certain of SARS’ assessments lacked merit. Hence the reason for the “easy” resolution of a dispute in the past. Not anymore. At least not in our experience.
One must bear in mind that SARS auditors are tax experts. They do tax and only tax, unlike many accountants and auditors in private practice who has many important things, in addition to tax, to keep them busy. The balance of power, from a level of skill/resource basis alone, makes it an unequal battle between SARS and accountants/auditors in private practice who represent taxpayers in tax disputes. Furthermore, the tremendous legislative power afforded to SARS arguably puts SARS at a further advantage. Even further still, SARS does tend to enjoy a large amount of public trust, this trust is often, in our experience, the cause of challenges being abandoned prematurely. Too often have we heard our clients saying that if it wasn’t for our representation, SARS would have “walked right over them”.
Clearly then, taking on SARS without roping in experts is like taking a knife to a gunfight.
Unicus Tax Specialists SA is a niche, tax-exclusive advisory firm, meaning we don’t do accounting, auditing or offer any other service (in fact we don’t even do any tax compliance work). Meaning, like SARS, we do tax, day in and day out and nothing else.
Our speciality practice area is tax dispute resolution. Our team is headed by Nico Theron (Chartered Tax Advisor (SA)), author of Lexis Nexis’ Practical Guide to Handling Tax Disputes, Chairman of the South African Institute of Tax Professionals Tax Administration Work Group, guest lecturer on tax dispute resolution at post grad level at UP and WITS, head lecturer on The Tax Faculty’s dispute resolution course and founder of Unicus Tax Academy.
Unicus Tax Specialists SA, has, at the time of writing, always been able to secure a satisfactory outcome for our clients in their disputes with SARS, thereby saving our clients hundreds of millions of rands in taxes, penalties and interest.
As an accountant/auditor, you don’t have to take a knife to those fights that are actually gunfights. Partner with Unicus Tax Specialists SA. We are hired guns, so to speak – we focus only on solving the dispute and then we’ll move along to the next bigger issue to be dealt with.