Increasing migration of taxpayers in South Africa

The 2022 tax season will open in July – a condensed filing season compared to 2021, which was extended due to the long-tail impact of the pandemic, notes Hannes van den Berg, CEO at Consult at Momentum, who adds that instilling confidence in taxpayers is essential to increasing taxation.

“A significant change in this year’s tax season shows that automatic assessments no longer have to be ‘accepted’ by hand if the taxpayer agrees with the calculation; an attempt by the South African Revenue Service (SARS) to support tax returns saw the growing number of South Africans not filing their tax returns.

Van den Berg believes that much work needs to be done to rebuild taxpayers’ confidence in the current structures if SARS’s mission to strengthen the tax haven is to improve. He said that although there have been a few high-profile tax evasion lawsuits recently, the number of cases where SARS needs to take court action to recover revenue is relatively low.

Rather, he believes that what we need to be very careful about is the increasing migration of taxpayers – a trend that has become apparent among individuals with high net worth (HNWI), who make up a significant part of the taxpayer base of the country.

“We have seen an increase in customer interviews about immigration, dual citizenship and the externalization (offshoring) of assets. This has the effect of causing serious leaks in our tax haven,” he said.

He said the taxpayer should boost his income collection – and fast. The joint publication by the National Treasury and SARS on tax statistics for 2021 showed that revenue collection for the fiscal year 2020/21 had decreased by almost 8% – or R106.1 billion.

However, its potential has become increasingly limited against the current economic backdrop of slow growth, load shedding, skyrocketing unemployment and rising inflation, Van den Berg said.

“Yes, this past quarter showed signs of recovery, with large retail groups reporting promising results. Unfortunately, this is likely to be short-lived, with massive fuel increases and inflation eating up consumers’ incomes.

Momentum said the government knows there is no real room for maneuver to increase personal income tax, and its recent announcement on extending the fuel tax cut shows that it is well aware that consumers are on the brink. “Any attempt to increase the individual tax rate could push South Africans over the edge and cause resistance, as we recently saw with the e-toll revolt.”

Van den Berg said the only real options available to SARS are to find new ways to increase revenue through indirect taxes “At the end of the day, consumers will still pay, but it can be a marginally less bitter pill to take. lick. “

The other avenue is to collect revenue below its current taxpayer base. SARS has announced that it will follow this route by limiting current exemptions, thereby reducing the complexity of the system and broadening the tax base.

“Attempts are being made to gain a better understanding of the causal factors behind the decline in revenue, but it can certainly not be underestimated the fact that taxpayers are being pushed beyond their bounds and frustrated by the current state of affairs,” Van said. the mountain.

Another consideration is that a small minority of South Africans pay an unusually large amount of tax, but that they do not experience satisfactory service delivery, which leads to further frustration.

According to Momentum, the issue of social subsidies is another issue that is often controversial among taxpayers. Van den Berg said that although taxpayers can buy from a humanitarian perspective, many funds for social spending have been lost through corruption. Moreover, some are worried that a growing dependence on social subsidies (SA already spends 3.3% of its GDP on social spending) will limit economic recovery.

“The result is that law-abiding citizens who see taxes as an integral part of a functioning society are concerned about the compulsory payment of their taxes and do not look back much.”

So what can be done to rebuild taxpayers’ confidence and increase tax collection – critical to SA’s economic recovery?

Van den Berg said that while SARS is a robust institution, it should ensure that it uses the necessary skills to deeply understand and research the tax affairs of companies and individuals so that it can be individualized rather than generalized.

“Filing a tax return causes fear among taxpayers – this should not be the case,” he said.

Finally – and most importantly – he said that active efforts must be made to prosecute those guilty of fraud, corruption and tax evasion. “There should be no fear or advantage when it comes to prosecuting guilty parties.

“This proves to taxpayers that no one is above the law and that an active effort is being made to direct tax revenues to where it is most needed – instead of in the pockets of unscrupulous individuals.”

To read: South Africa’s largest landlord reveals the truth about a return to the office – and trends of working from home

Increasing migration of taxpayers in South Africa

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