SARS eyes real-time tracking
PHILIP TILLMAN
A LIVE feed of your business’ VAT data to SARS could become a reality in the next five years, if a recent discussion paper is anything to go by.
In what could mark one of the biggest changes to South Africa’s VAT regime since 1991, SARS published its discussion paper on Value-Added Tax Modernisation during September 2023.
The paper is inviting input from various stakeholders and the public with the aim to initiate a process to modernise South Africa’s sales tax system and update the VAT return to enhance compliance, efficiency, and transparency.
SARS says that it aims to modernise the VAT system in stages, including implementing near-real-time or even real-time digital transmission from businesses to the revenue collector.
To date, SARS has regarded VAT as a ‘self-assessment’ tax, which means that the onus has largely been on businesses to honestly provide accurate information on their tax returns.
SARS, therefore, wants better visibility of the entire supply chain process that generates VAT tax revenue, so that it can determine the tax liability and not just rely on self-determination. By doing this, SARS will in future want to demand real-time knowledge, while maintaining the self-assessment method.
This is the ‘mother-in-law’ method where SARS already knows the correct answer, and is effectively waiting to see if a business gets it wrong in its tax returns.
How businesses can prepare
Companies must be proactive, and should already start asking themselves now whether SARS’ knowledge of their real-time transactions (sales and purchases) is a risk to them. If it is, they need to eliminate the source of that risk to ensure full compliance.
All businesses should consider whether their accounting software is going to be capable of complying with any new VAT requirements.
It’s going to become crucially important that your business’ software is also cloud-based, as there may be a requirement for it to continuously communicate directly with SARS.
Depending on the size of your business, you may also need to weigh up whether the tax compliance burden is sufficient to require dedicated compliance and management software to automate some of the processes for you.
Considerations for SARS
While there’s no doubt that SARS’ intention with its VAT modernisation drive is to mitigate leakage, achieve maximum permissible tax revenue collection, and reduce the cost of administration and non-compliance detection, the reality is that it will have some hurdles to overcome.
The revenue collector must bear in mind the potential cash-flow implications for taxpayers, if any, for complying with any new regulations. If updated or new software is required, there could be extra costs involved for businesses.
Added to this, many entities that should be registered for VAT are businesses in the informal sector—and they often don’t use finance systems. SARS needs to find a way to help these entities comply with any new regulations.
There’s no doubt that there will be a greater focus on VAT collection and compliance going forward, especially as it continues to be one of the biggest revenue generators for the country.
In February’s Budget speech, National Treasury reported that VAT revenue alone accounted for R472 billion of the total R1.78 trillion in tax revenue for the government’s latest financial year—and with recent reports of growing pressures on South Africa’s fiscal position, the government will look to tighten the taps wherever it can. Businesses must get ready now.
Comments on the Discussion Paper may be submitted on or before 31 October 2023 to policycomments@sars.gov.za.
Philip Tillman is the chief executive officer of Konsise, which is part of SurTech—a provider of governance, risk, and compliance (GRC) software.
