30 Sep Latest update: See why SARS is homing in on company cars and travel allowances
SARS is having trouble meeting its revenue targets and this is clearly putting enormous pressure on the South African economy. Further economic deterioration in the economy will probably result in a downgrade to junk status by Moodys. This will mean that all three of the major ratings agencies will have consigned our economy to junk status which means further currency weakness and probably a recession.
Most of the tax paid in South Africa is paid by individuals and it is logical that SARS will focus on maximizing its revenue with this segment of taxpayers. Thus, one can expect more auditing by SARS of employees’ tax returns.
Implications for employees
Any SARS queries will be initially directed at employees who will have to justify what they have claimed. Most employees will go back to their employer and say, for example, ‘there is this query on my car allowance and how should I respond?’
It would make sense for employers to ask all employees to run SARS’ questions through the employer so that SARS receive a consistent answer (employees may have their own tax adviser to help the employee respond to the query, but the adviser may not understand how the employer’s tax administration works).
Implications for employers
If SARS are not satisfied with the responses to their queries, they may start to look at how the employer administers its employee tax obligations.
SARS places a substantial onus on employers to collect tax and to pay it over to the Revenue authorities. This involves a knowledge of taxes like:
- Remuneration and benefits paid to:
- expatriate employees
- local employees
- executives and directors
- Retirement benefits for employees, executives and directors
- Payments to labour brokers and independent contractors
- Share incentive schemes
- Cash book payments
- Gifts, prizes, awards and gift vouchers
- Loans to employees
- Company cars
- Travel allowances and reimbursements
- The Employment Tax Incentive (ETI).