According to Joon Chong, a partner at Webber Wentzel, the South African Revenue Service (SARS) intends to collect taxes from individuals in real time on a monthly basis, but various practical obstacles must be resolved first.
In February 2020, SARS said that as part of its "Vision 2024" initiative, it aimed to become a future revenue authority informed by data-driven insights, self-learning computers, AI, and other technologies.
Vision 2024 is to use third-party data to generate a "assessment" of an individual, with real-time tax liabilities displayed, which will be valid under the Tax Administration Act, according to Chong.
Vision 2024, according to a recent SAIT/SAGE payroll tax update webinar, aspires to:
In a recent meeting with tax practitioners, Chong said SARS outlined its Vision 2024 to do away with the “filing season” in 2025.
“Currently, banks, financial institutions, medical schemes, attorneys, estate agents and issuers of bonds, debentures and financial products are required to file third-party returns to SARS once a year after the end of the year of assessment which accrued to a taxpayer in that year and contain information on interest, dividends or capital gains from that year,” said Chong.
“These third-party returns, together with the IRP5 certificates issued to employees and EMP 501 returns filed with SARS by employers, are currently used to pre-populate the ITR12 annual tax returns for individuals.”
Vision 2024 envisions a data analytics environment in which SARS receives real-time monthly data from third parties, which is then utilized to construct a "evaluation" on a SARS app.
“It appears that the third-party data could be used by SARS to generate an “effective tax rate” for each taxpayer,” Chong said.
SARS can require employers to withhold employees' tax [PAYE] using the higher effective tax rate rather than the lower calculated rate based on the actual remuneration paid by the employer through a "push directive" or the IRP3e directives issued by SARS to "employers," according to the legal expert.
For annuitants that earn multiple streams of annuities, this process is already in place. Instead of the rate specified in the IRP3e instructions, annuitants might choose to have their PAYE withheld at the lower computed rate.
Trust distributions and section 18A gifts, according to Chong, are not currently disclosed to SARS through third-party data reporting. Vision 2024 may also demand third-party data on these transactions, he said.
However, there is no information on how SARS plans to collect tax on company revenue, rental income, and capital gains that are not subject to third-party data reporting.
“It appears that these taxpayers will need to update the app with these amounts and monitor and pay their monthly tax liabilities on the app as they arise.”
"If tax is triggered in March and only paid in January, interest will be payable for the ten-month delay between the due date and payment date," Chong said, using an example provided by SARS.
Webber Wentzel's experts predict that:
To enable the execution of Vision 2024, the Tax Administration Act and numerous other tax statutes will need to be revised.
As mentioned in the 2022 Budget, the provisional tax system will be revised in light of changing conditions and international trends, and this review would coincide with the execution of Vision 2024.
SARS will disseminate information on Vision 2024, including the implications for employers and employees, as well as anyone who is obligated to file third-party data with SARS.