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vat registration
Emerging in the recent tax submission season, many have expressed their ongoing frustrations with The South Africa Revenue Services (SARS) regarding their methods for tax return verification selection. This verification requires the selected taxpayer to verify the legitimacy of the information declared in their original return by providing the relevant financial records and other supporting documents, such as those regarding VAT registration.
Bias in the selection process?

Despite the belief that SARS may specifically target taxpayers to reveal non-compliant behaviour, they have recently confirmed that their means to determine who is selected for verification is done purely through their risk algorithm.

SARS commissioner Edward Kieswetter has shared that selection is based on risk markers and non-compliance potential, emphasizing that the entity size of the taxpayer is not a factor. The commissioner also highlighted that more than two-thirds of individuals selected by the risk engine had shown signs of previously repeated non-compliance.

SARS verification: The public opinion

The overall consensus on the tax submission process was positive. However, there were still several pitfalls experienced by various taxpayers – including those selected for verification to confirm compliance.

The South African Institute of Chartered Accountants (SAICA) highlighted that taxpayers, and small businesses, in particular, were experiencing frustration when attempting to complete their VAT returns, pointing to blatant system flaws. This criticism has been echoed amongst various industry figures, bringing further scrutiny to the methods used and entities SARS has targeted, shedding light on the argument that smaller entities are the easier targets in these processes.

The way forward

To prevent taxpayer’s unease and complaints in the coming financial year, SARS will aim to improve public trust and confidence in the system as they navigate their new approach to tackling non-compliance. Despite the weaknesses of the past financial year, SARS has improved its performance and continues to do so.

Should you be selected by SARS for a tax verification, taxpayers should contact their MMS tax advisor for guidance in navigating this process. MMS Group is a leader in tax consulting and can provide an array of services relating to income tax. Should you require the services of our expert tax consultants for income tax or VAT registration, please reach out to our team.