TAX TALK — THE RECEIVER EXPECTS TOO MUCH

Generally taxpayers feel that the Receiver of Revenue expects too much from them.

You can’t blame anyone for his view because there are different tax forms for the different categories of taxpayers and income tax; social security, medical aid, pension and value-added tax must be paid out of the gross salary. In addition to this, everyone seems to think that the tax rates are too high.When self-assessment was introduced in 1997, the Receiver placed the onus for the determination of the amount of tax payable on each taxpayer.Different colour tax forms were introduced around the same time that complicated the tax administration system even further.These changes were made with Revenue’s intention to simplify the tax system for all taxpayers.The general view is however that Revenue complicated everything.Take for example the different colour tax forms.If you are employed by the same employer for the full tax year and only receive income from employment which includes no car allowance or entertainment allowance you are classified as a non-filer by the Revenue department and may get a brown form to complete and return to the Receiver of Revenue.If you receive salary income that includes a car allowance or earn income from renting out property, you should get a blue tax form to complete and return to the Receiver.If you carry on a business in your own name (commonly known as a sole proprietor) you should receive a yellow tax form to return your income to the Receiver of Revenue.Your status may change from one year to the next that complicates the administration system even further.The other important thing about your tax form is the date by which you must have completed and returned to the Receiver of Revenue.The brown and blue form is due by 30 June each year and the yellow form is due by 30 September each year.At least these dates are reflected on the tax return that you should not miss – check the printing in red on the top of page one of the form.Once you have worked out which colour tax form you should complete and by when it must be returned to the Receiver of Revenue, try to complete it by yourself.You virtually need a degree to complete the blue or yellow form and Revenue seems to be very harsh on you should you get it wrong.Interest is levied on the on tax short paid retrospectively even if you made a genuine mistake when completing your tax return.This in my view is where they are going wrong because the Income Tax Act makes provision for the procedure to be followed by the Receiver if you get your tax calculation wrong.The Income Tax Act provides that the taxpayer’s tax return and tax calculation is subject to examination.If the examination reveals that the taxpayer’s calculation was incorrect, the Receiver of Revenue must issue an assessment indicating the amount of tax payable and the date before which the tax must be paid.Currently the Receiver issues an assessment after finding that the taxpayer has made a mistake but advises the taxpayer that the tax as a result of the mistake should have been paid some time in the past and imposes interest on the short payment from the date the original tax return was due.This seems to be very unfair and Revenue is therefore expecting too much from the average taxpayer.This kind of system contributes to poor taxpayer morale because the odds seem to be stacked against the taxpayer all the time.A fair tax system significantly contributes to good taxpayer morale and the Receiver must ensure the system is fair and equitable.In this series of articles, Cameron Kotze the Tax Partner at Ernst and Young discusses some topical tax issues for our readers.Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.In addition to this, everyone seems to think that the tax rates are too high. When self-assessment was introduced in 1997, the Receiver placed the onus for the determination of the amount of tax payable on each taxpayer. Different colour tax forms were introduced around the same time that complicated the tax administration system even further. These changes were made with Revenue’s intention to simplify the tax system for all taxpayers. The general view is however that Revenue complicated everything. Take for example the different colour tax forms. If you are employed by the same employer for the full tax year and only receive income from employment which includes no car allowance or entertainment allowance you are classified as a non-filer by the Revenue department and may get a brown form to complete and return to the Receiver of Revenue. If you receive salary income that includes a car allowance or earn income from renting out property, you should get a blue tax form to complete and return to the Receiver. If you carry on a business in your own name (commonly known as a sole proprietor) you should receive a yellow tax form to return your income to the Receiver of Revenue. Your status may change from one year to the next that complicates the administration system even further. The other important thing about your tax form is the date by which you must have completed and returned to the Receiver of Revenue. The brown and blue form is due by 30 June each year and the yellow form is due by 30 September each year. At least these dates are reflected on the tax return that you should not miss – check the printing in red on the top of page one of the form. Once you have worked out which colour tax form you should complete and by when it must be returned to the Receiver of Revenue, try to complete it by yourself. You virtually need a degree to complete the blue or yellow form and Revenue seems to be very harsh on you should you get it wrong. Interest is levied on the on tax short paid retrospectively even if you made a genuine mistake when completing your tax return. This in my view is where they are going wrong because the Income Tax Act makes provision for the procedure to be followed by the Receiver if you get your tax calculation wrong. The Income Tax Act provides that the taxpayer’s tax return and tax calculation is subject to examination. If the examination reveals that the taxpayer’s calculation was incorrect, the Receiver of Revenue must issue an assessment indicating the amount of tax payable and the date before which the tax must be paid. Currently the Receiver issues an assessment after finding that the taxpayer has made a mistake but advises the taxpayer that the tax as a result of the mistake should have been paid some time in the past and imposes interest on the short payment from the date the original tax return was due. This seems to be very unfair and Revenue is therefore expecting too much from the average taxpayer. This kind of system contributes to poor taxpayer morale because the odds seem to be stacked against the taxpayer all the time. A fair tax system significantly contributes to good taxpayer morale and the Receiver must ensure the system is fair and equitable. In this series of articles, Cameron Kotze the Tax Partner at Ernst and Young discusses some topical tax issues for our readers. Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.