The mini-budget: tax education remains imperative
Finance Minister Trevor Manuel’s mini-budget has been greeted as largely positive for South Africa, with his use of our surplus to effectively weather the current economic downturn. While the fact that the South African Revenue Service (SARS) looks set to meet its R642,3bn tax revenue target is good news, Anton Kriel, tax director at BDO Spencer Steward (Cape), maintains that Government’s expected increase in individual income tax collections is significant. Taxpayers are experiencing an increasingly vigilant attitude from SARS and can expect to see more tax penalties and more tax “gaps” plugged. As such, tax education has become imperative.
2008 has been a year of economic turmoil for most countries around the globe. Just six months after delivering his budget for 2008, Trevor Manuel chose to reassure the nation yesterday, saying that the country is expected to remain relatively insulated from the global downturn. With the budget surplus now looking as if it may swing into a deficit – expected to fall even further to 1,6% of GDP next year – the continued good work of SARS is paramount in terms of maintaining economic stability.
This is something the revenue service is only too aware of, using its achievements of the past to continue meeting tax collection targets in the future. Meeting the R642,3bn target set this year will enable the government to meet its expenditure targets and its loan to Eskom, among others.
Increased pressure on SARS in terms of collection means increased pressure on tax payers however. While SARS has worked very hard to facilitate and encourage good tax compliance among individuals and corporates, it has simultaneously introduced very strict penalties for non-compliance. A far larger portion of this “tax revenue target” will in future be directly attributable to these penalties – something BDO Spencer Steward is becoming increasingly concerned about. Income tax legislation has not become “simpler” or easier for the man on the street to understand as promised ten years ago, but rather as complex as that of numerous first world countries. This has resulted in a significant burden of compliance being placed on tax payers in certain instances, with many ill-equipped to understand or lacking the discipline needed to meet tax compliance requirements.
Although SARS has undertaken numerous tax “literacy” projects and done much to facilitate the easier filing of returns for example, there are still significant gaps in terms of consumer education – gaps which lead to penalties unwittingly being incurred. A lack of understanding of tax legislation within all LSM (Living Standard Measure) groups has also seen an increase in the need for professional tax advisory services, making compliance an expensive exercise for taxpayers.
Taxpayers are also finding that legislation is being continuously changed by SARS to curb perceived loopholes and inadequacies in the legislation, with SARS and Treasury working very closely together to ensure that SARS is given more and more administrative authority to act against and “punish” defaulting taxpayers. While this is a reflection of their commitment to financing the needs of the country, when it comes to tax one has to strike a careful balance between “taking” and “giving back”. As of yet, we are not sure where SARS’ commitment to achieving its objectives will end: what limits it will go to in this regard.
While the mini-budget has arguably reinforced Government’s commitment to encouraging the growth and development of South Africa, reading between the lines when it comes to tax collection objectives leaves much food for thought. Tax education would seem more imperative than ever before for individuals, ensuring one pays what is due when it’s due – thus avoiding any possible penalties and undue tax costs.
