Government Compliance Presentation

National Departments CFO Forum

06 August 2015

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Table of Contents

• Tax Overview

• Government Institutional Compliance (Background and Objectives)

• Action Items from Previous Interactive Sessions

• Single Registration and the Merging of Profiles

• Tax Compliance Status for National Departments

• Employer’s Obligations in terms of PAYE Processes

• AA88 project

• Tax Accountabilities

• Challenge to Govt. Departments

• Questions and Answers

• Contact Details

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Tax Overview

Tax

Treasury

Government Departments

Basic Services

SA Citizens

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Threat to Tax compliance

Tax compliance is dependent on :

• Commitment to the future

• Equal treatment

• The ease of a tax payment system

• The perception that tax revenue is used responsibly

• The perception that wilful defaulters are penalised

The way that SARS responds to none compliance by State Institutions has a negatively or positive impact tax morality

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Government Institutional Compliance (GIC)

Background and Purpose • Background

– Established in October 2010

– Provide Service to all 3 spheres of government

– Does not seek to replace the other units of SARS but provides monitoring of tax compliance, service and education to government as a taxpayer

• Engagements and Intended Objectives

– Institutional Assessments and Interactive Session was about building relationships with Government Institutions. Now contact session – a more detailed and one-on-one engagements with clients

– Increased and sustainable tax compliance capability of Government Institutions (our country’s first citizen) and the resultant positive impact e.g. Public confidence and benefit, ease and fairness of doing business, reduction of compliance cost.

– Enabling taxpayers and the government segment specifically, to pay the right taxes at the right time and at all times (with less effort and at a reduced cost)

– Improved functioning of the whole Government system.

– In line with the NDP plan of building state capability 5

Previous Session with the National Depts. - Action Items

Action Item Progress to Date

Update Registered Particulars • Very few updates to date • Dept. per previous administration still on the SARS

Database

Incidences of no feedback from SARS and individual queries Dealt with on receipt

SARS to provide details on the IT88 and ITA88 (now AA88) and its implementation using e@syFile

Debt currently on R220million and increasing

Investigate unallocated payments and seek means to resolve these payments

• The change on SARS banking details • Dedicated project from GIC and Account

Maintenance in SARS

Assist with backlogs on the updating of demographic data and the submission of the Recons

Due date 2012 filing season for the employers

Investigate the use of full suite of SARS technology solutions by government institutions

Dedicated project from GIC

The refunding of PAYE credits Request was taken up with the Refund Section in SARS

Review process to verify TCC and provide online verification facility

Training on the online verification on eFiling

Facilitate interaction between systems administrators (PERSAL, BAS and SARS Business Systems) and the impact of IFMS

Platform has been set between NT SITA and SARS

Establish Government Liaison Office Under consideration but GIC to fill the gap in the meantime

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Single registration & Entity Merge OBJECTIVES

SINGLE REGISTRATION

• SARS needs accurate and comprehensive data about all the different kinds of

taxpayers in order to fulfil its mandate to collect revenue due and ensure optimal

tax compliance – referred to as legal entities, in terms of Single Registration.

• This new service allows SARS to ;

Provide Taxpayers with a consolidated view on their Tax Profile

Communicate accurately on their tax matters

Reduce the number repeated updating of demographic detail

Standardise our services across Tax Types

Ensure improved data integrity

Simplify the registration and maintenance to registered particulars processes

Reduce the amount of paper driven manual processes

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Single registration & Entity Merge OBJECTIVES

Merging of Profiles

• In May 2014 SARS has implemented a capability for all registered taxpayers (Institutions &

Individuals) to view and maintain their registered particulars across tax types (VAT/PAYE

/IT & Customs) in one place.

• As part of the modernisation journey SARS have embarked on a data matching and data

clean-up exercise , which validates an entity’s tax records across our various tax system.

Due to various misalignments on information across the various core tax systems, SARS

requires registered entities to assist us by indicating which tax products/tax reference

numbers should be included into their Tax Profile.

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National Depts. - Tax Payment Compliance

Amounts Outstanding:

• -R39 785 870 (1 Dept. <R15m, 3 Depts. <R4m and 1 Dept. <R1m)

• 5 Depts. making most of the above debt

• 24 Depts. without debt

Unallocated Payments

• -R 761 304 063

• All but 2 new departments have unallocated amounts

• 1 with <R580m and another with <R89m

Returns Outstanding

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Employers Obligation Pay As You Earn

• Meet Requirements:

• *Employer, Employee and Remuneration Agreement

• Register for PAYE - EMP101 –Tax Number Starts with “7”

• Register UIF – Department of Labour

• Register with SETA –Total Payroll over R500 000 pa

• Submit and Pay EMP201 every month

• Submit and/or Pay EMP501 every 6 months

• *UIF ”U” and SDL “L” will automatically be registered with SARS, when registered for PAYE

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Employers Obligation

• An employer is obligated to pay over any taxes collected from

his/her employees to SARS before the 7th of every month along with the submission of the EMP 201 Return.

• Each employee is entitled to receive an IRP 5/IT3a certificate reflecting the Income earned by such employee during the tax year. Must be issued within 60 days after the end of the tax year

• The employer has to reconcile all taxes deducted with the income earned by such employees by means of an EMP 501.

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Employers Obligation: EMP 201

• The employer is obligated to submit a tax return declaring the total tax deducted from employees on a monthly basis.

• The tax return is known as the EMP201.

• Penalties and Interest will be charged on late payments

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3rd Party Appointments (Employers) Appointment Cycle to employers (Admin Penalties only)

Month 1

1st 15th

- New debt on taxpayer’s account - Issue AA88 Recon Statement to employer

Month 2

Notes: • Each AA88 transaction issued must be handled as a separate transaction, a new AA88 does not necessarily replace

another except in the case of affordability • 3rd Party Appointment Recon Statement presents the AA88 movement (i.e. created, cancelled, paid transactions) of

the previous calendar month per employee/ taxpayer

Issue 3rd Party Notice for total overdue & undisputed debt

- Issue 3rd Party Appointment Notice to employer

Month 3

1st 1st 15th

New debt on Taxpayer Account

Issue AA88 Notice for additional debt

Month n

R250 R250 R250 R250

R750 R250 Issue 3rd Party Recon (Recon Statement)

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ITA88 – Employers View 3rd Party Appointments (Employers) Employer interaction with SARS

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AA88 Enhancements on e@syFile

• AA88 Summary Information – Displays overall standing towards AA88

• Simplified the Third Party Appointment tabs and added transaction status

• Enhancements to the submission process for outcomes (i.e. No Longer

employed)

• Synchronisation improvements

• Change to the affordability outcomes – SARS calculate affordability terms

• Enhanced the exporting of AA88 data from e@syFile

• Introduced “active” help to guide employers

• Introduced Programmatic PERSAL deductions for Provincial & National Depts.

• Enhanced overall usability

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Tax Accountability Legislation

• PFMA, Act 1 of 1999: – Accountability in terms Sec 36 and Sec 38(e) for Accounting Officers and

Sec 49 and 51(d) for Accounting Authorities – which provides that the Accounting Officer must comply with any tax, levy, duty, pension and audit commitments as may be required by legislation

– Delegation in terms of Sec 44 and Sec 56 – which provides for the delegation of powers and duties of the Accounting Officers/Accounting Authorities

– Financial Misconduct Chapter 10, Sec 81 for Accounting Officers, Sec 83 by Accounting Authorities

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Tax Accountability Legislation (Continued)

• TAA, Act 28 of 2011 ‒ Sec 179 which provides for the liability of third party appointed to satisfy

tax debts

‒ Sec 157(1) of the Tax Administration Act (Personal Liability of withholding agent).

‒ Sec 184(1) of the Tax Administration Act (Recovery of tax debts from responsible third parties)

‒ Sec 234 to 238 which criminalises non-compliance with tax Acts

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Tax Accountability Legislation (Continued)

• Basic Conditions of Employment Act Deductions

‒ Section 34 (1) of the Basic Conditions of Employment Act prohibits an employer from making deductions from an employee’s remuneration without the employee’s consent and if the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.

What deductions are allowed?

‒ Personal or study loans - employee has consented to

‒ Loss or damage - employee has consented to

‒ Statutory deductions – such as UIF, PAYE and Workman’s Compensation contributions.

‒ Union subscriptions – provided for in a relevant collective agreement which covers the employee.

‒ Garnishee orders – where a court has ordered an employer to make monthly deductions from an employee’s salary to pay off a judgement debt owed to a third party.

‒ Overpayments – where an employer has mistakenly overpaid any salary or benefit to an employee. The monthly repayments must not exceed the 25% limit on the employee’s salary referred to in section 34 (2).

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Challenge to Govt. Departments

• Activate single registration and update registered particulars

• File and pay on time

• Reference correctly when making payments

• Reconcile the submission and payments accordingly

• Issues employees with IRP 5/IT3a certificates

• Organise yourselves as a groups/forums with common interest or challenges

• Initiate discussions and invite SARS to address specific topics/challenges affecting you as a group

• Make use of SARS technology products e.g. eFiling, e@syFile and government webpage on the SARS website http://www.sars.gov.za/ClientSegments/Businesses/Government/Pages/default.aspx

• For queries and appointments, make use of the following email channels and on the subject line indicate “Government Institution” and the nature of the query;

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BRANCH E-MAIL

Pretoria North appointments.ptanorth@sars.gov.za

Doringkloof Doringkloof.appointments@sars.gov.za

Pretoria CBD PtaCBDappointments@sars.gov.za

Ashlea Gardens appointments@ashleagardens.gov.za

Q & As

Thank you

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Contact Details

“Tax payable can be reduced if everyone pays their fair share”

Contact Details

Sithembiso Msomi: GIC

• : smsomi@sars.gov.za

• ( (012) 422 8487

• 082 499 7755

THE REAL RECEIVER IS THE NATION

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