What does it mean to be tax compliant or non-compliant? How do you know your status? And what are the effects on Government’s ability to weather the storm of ‘COVID-19’ and beyond.
What is compliance?
‘Compliance’ can be defined as the act of adhering to laws or rules, which shows confidence in and acceptance of the laws and the lawmakers.
In the tax world, compliance means that taxpayers have met their legal obligations under the tax laws, which include ensuring that all tax returns are submitted and that tax liabilities are paid timeously.
If a taxpayer is non-compliant with the tax laws, punitive provisions, which include monetary and criminal sanctions, will be enforced by SARS. Being compliant is a legal requirement for all taxpayers, irrespective of the alert level, variant, or wave of the COVID-19 pandemic.
COVID-19 saw certain tax relief measures implemented to ease the financial strain on qualifying taxpayers. The main requirement for a qualifying taxpayer was that the taxpayer had to be compliant.
This encouraged taxpayers who wanted to benefit from the tax relief measures to ensure that they were compliant with their taxes.
Compliance status
The question is, then, how do taxpayers know whether they are tax compliant?
There are two ways in which taxpayers can check their tax compliance status; they can request a tax clearance certificate or they can confirm their compliance status directly with SARS.
Taxpayers can view their compliance status and request a tax clearance certificate on the ‘Tax Compliance Status’ (TCS) system on eFiling. This will allow taxpayers to identify whether any monies are due or tax returns are outstanding to remedy any non-compliance.
Taxpayers will be compliant for TCS purposes if they:
- do not owe SARS any money (unless a settlement plan or suspension of debt has been agreed to with SARS or the amount is less than R100);
- have filed all tax returns;
- are registered for all taxes for which they are liable;
- have updated all registered particulars; and
- have either merged or declared all registered tax reference numbers
It is also important to note that the compliance status is fluid and subject to taxpayers’ continued compliance with the tax laws. The TCS system allows compliant taxpayers to apply for tax clearance certificates in respect of the following:
- tenders;
- foreign investment;
- emigration or cessation of tax residency; and
- good standing.
Benefits of being compliant during Covid-19
Being compliant ensures that taxpayers will avoid the possibility of penalties and interest charged on defaults, as well as falling foul of the offence provisions; this may result in a taxpayer being subject to a fine or even imprisonment. It also allows taxpayers to engage in business with the public sector, where it is essential that suppliers registered on the Central Supplier Database (CSD) are tax compliant.
Compliant taxpayers can tender for government work, remit monies offshore, obtain clearance when ceasing to be tax residents, and obtain good standing tax clearance certificates.
Unfortunately, the government did not extend or elaborate on the COVID-19 tax relief measures introduced last year.
Tax morality
The inclination (or disinclination) of taxpayers to be compliant by filing their tax returns, paying their taxes, and complying with their legal obligations under the tax laws has been a moral issue for most South Africans for a very long time.
Non-compliant taxpayers have attempted to justify their actions by blaming the government and the level of corruption; the mismanagement of funds; the lack of service delivery and transparency; and state-capture to name a few.
But a tax revolt owing to low tax morality implies a deliberate action by taxpayers to commit fraud, steal, or decide not to pay SARS for taxes administered, or not render a return required by SARS, or render a fraudulent return, is not the answer. Therefore, it cannot be justified.
The government continues to rely on tax collections from all taxpayers to meet its responsibilities toward the people of South Africa, to ensure our health and safety against this pandemic, and to grow our country’s economy.
A friendly reminder regarding the 2022 Formal Individual Tax Submission deadline, being 24 October 2022. Should you require any assistance submitting your returns, or confirming your Tax Compliant Status with SARS, please do not hesitate to email Kirsten Mitchell: kirsten@resolutewealth.co.za
