In late July 2021 SARS published a draft notice to warn individual tax payers of their intention to charge penalties for the late filing of income tax returns in the following circumstances:
- Failure by a natural person to submit an income tax return as and when required under a tax Act, for years of assessment commencing on or after 1 March 2006, where that person has, with effect from 1 December 2021—
- two or more outstanding income tax returns for years of assessment commencing on or after 1 March 2006 but ending on or before 29 February 2020; or
- one or more outstanding income tax returns for years of assessment commencing on or after 1 March 2020.
- Failure by a natural person to submit an income tax return as and when required under the Income Tax Act, for years of assessment commencing on or after 1 March 2006, where that person has, with effect from 1 December 2022, one or more outstanding income tax returns
There is no doubt SARS is under pressure to collect tax and they do have a legal right to do this. The challenge we have is the unfair environment in which SARS operates and the potentially unintended consequences actions like this will create. For example:
- If SARS systems were world class and errors didn’t happen then charging penalties for valid non submission would be understandable. However, SARS systems often make mistakes and we can quite easily see scenarios where individuals are not required to submit a return, but SARS believes erroneously they should and charges a penalty even where no tax is owing;
- We are all aware South Africa sees many people emigrating each year. While we would like to say that everyone knows their Income Tax Act off by heart in the way SARS expects, the practical reality Is that they don’t. In many instances these individuals are no longer tax resident in South Africa and have no South African source income. However, because they may not have closed off their affairs properly there may arise a situation where they have penalties and interest on their accounts and don’t want to visit South Africa in case SARS decides to arrest them to pay their bills. An extreme scenario, but do we really want to face this.
There must be better ways to go about filling the fiscal funding gap.