What used to be ‘Tips for Trevor’ became ‘Points for Pravin’, and in each Budget Speech a lucky citizen gets an honorary mention for their tip or point.
If I had to make only one point to Pravin, my point would be; cut the red tape, make it easy for taxpayers to get on the tax register, to comply and to pay their fair share of taxes.
There are many examples where this could be applied, but a particular challenge that has received widespread coverage over the last few years is the process to register as a vendor for Value Added Tax (VAT) purposes. Despite this coverage we seem to be no closer to resolving the issue and in fact it appears that the process will become more problematic in future with, for example, the introduction of biometric information.
The process to register as a vendor is long and cumbersome – there is a long list of documents that are required and the representative vendor is obliged to appear personally for an interview with the South African Revenue Services (SARS). Depending on which SARS office you go to, the list of documents required could change and one leaves with the impression that the goal posts are continually being shifted. SARS, for example, insists on seeing proof of trading before they register the vendor, which makes it difficult for a vendor that is buying a business as a going concern, or who knows that the capital they have invested is likely to push them over the threshold from the first month. Unusual registrations like the registration of a non-resident company or a foreign donor-funded project for VAT is also very problematic.
In some instances, I am sure this has the effect of dissuading taxpayers from applying for registration, even when they are obliged to do so (that is, when their registration is compulsory).
It is understandable that SARS is concerned with the risk of fraudulent refunds, but it is hard to see how making it difficult for legitimate taxpayers to get on the register mitigates this risk. After all, if one wanted to perpetrate a fraud, surely it would make sense to purchase a company that already has a VAT number, and use that as the vehicle to perpetrate the fraud? SARS gives you a hard time with initial registration, but has no processes in place to vet companies that have changed shareholding or representative vendors.
It seems that an inordinate amount of time is wasted on making it difficult to register instead of focusing on the refund itself – if the risk is that of fraudulent refunds being claimed; then let's make it difficult to claim the refund.
A possible solution would be to change the law and extend the period before interest is payable to six months, for say, the first three refunds claimed by a vendor – this will give SARS sufficient time to validate refunds, while not being penalised by having to pay interest. Or, for vendors that have intermittent refunds (that is, in most periods they should be a net pay-in position), treat a refund as an 'assessed loss' to be carried forward to the following period.
This will means that vendors that are usually in a net pay-in position won't have a hassle when trying to make good on their tax obligations. Let’s be practical, let's make it easy to contribute our fair share of tax.