Annexure C to this year’s Budget Speech, concerning additional tax policy and administrative adjustments, raised the issue of taxpayers’ tax compliance status.
Firstly, it was proposed that SARS be empowered to make exceptions for taxpayers with outstanding tax debt that are in the early stages of business rescue (or at least that such an exception be investigated). This is a welcome proposal.
Secondly, abuse of the tax compliance status system was raised, such as taxpayers filing nil (zero‐income) or otherwise inaccurate returns to meet the requirement of having no outstanding returns. The Budget indicated that approaches to ensuring that the system provides a more accurate reflection of the actual tax compliance status of taxpayers would be investigated. It is unclear how such a system would practically function, given the vast number of tax compliance status requests that SARS may receive on any given day.
Taxpayers’ tax compliance status can be of critical importance in their business dealings, for example when tendering for government work. The Tax Administration Act allows SARS 21 business days to provide third party access to a taxpayer’s tax compliance status. Since the introduction of the new Tax Compliance Status (TCS) system, which replaced the old Tax Clearance Certificate (TCC) system, a TCS pin is usually generated on the same day after requesting a pin on e-Filing. Such a speedy response time is welcomed, given the crucial role a taxpayer’s tax compliance status may play.
A compliant status requires a taxpayer to be registered for a tax type, have no outstanding tax debt (apart from debts that are subject to an instalment payment agreement, a compromise, a suspension of payment or that are less than R100) and have no outstanding tax returns (unless an arrangement has been made with SARS for the submission of the returns).
It remains to be seen how the tax compliance system will be tweaked to address the issues raised in this year’s Budget Speech.
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