South African Corporate Faith in SARS Wanes Amid Audit Delays

The South African Revenue Service (SARS) finds itself at a critical juncture as perceptions among corporate taxpayers tilt towards mistrust, revealed the latest Taxing Times Survey 2023 conducted by PricewaterhouseCoopers (PwC). As South Africa grapples with the aftershocks of state capture, it has become increasingly evident that SARS faces a herculean task in re-establishing its credibility among enterprises.

According to the survey, a mere 53% of corporate income taxpayers acknowledged receiving quality service from SARS—an improvement of 14% from the previous year, nonetheless indicating a divided sentiment. The veins of discontent seem to run deeper, with a significant 58% of respondents indicating a decline in trust towards the revenue service since the previous year, a sentiment echoed even as some acknowledge service improvements.

The decline in trust is primarily linked to prolonged waiting periods for audit completions and obstacles in communication. Enterprises are experiencing notable delays, with straightforward corporate income tax audits taking an additional three to six months, while those with the added complexity of international transfer pricing issues stretching by as much as a year.

Elle-Sarah Rossato, PwC’s lead partner in tax controversy, emphasized the monumental challenge SARS leadership faces in reconstructing an institution eroded by past maladministration. She identified efficient staffing as the critical starting point for SARS, suggesting that attracting and retaining skilled personnel proficient in complex tax operations is vital for expedited and accurate audits.

Moreover, communication hurdles persist for companies requiring clarification or resolution regarding tax discrepancies. Nonetheless, Rossato highlighted some positive changes over the past year, particularly in handling VAT refunds and personal income tax matters, where SARS has shown marked improvement. A significant reduction in VAT refund turnaround times was reported, with over R212 billion in refunds issued in the first half of the financial year.

SARS’ integration of advanced technologies like artificial intelligence and machine learning has also modernized personal income tax collection, culminating in the elevation of auto-assessments to 2.7 million taxpayers and thereby streamlining the tax filing experience. Additionally, SARS has fine-tuned its voluntary disclosure programs, facilitating a smoother process for taxpayers to report and rectify tax infractions.

While progress is discernible in certain areas, the overall picture shows a revenue service at a crossroads. With corporate trust in decline, it is imperative that SARS addresses the concerns highlighted by PwC's survey with judicious and prompt action. The health of South Africa's fiscal environment — and the trust of its corporate taxpayers — depend on it.