Surviving a SARS Audit With Insurance
The e-Filling system from the South African Revenue Service (SARS) is free and is also easy to use even by common people. But can one afford to defend themselves once SARS decides to audit their assets?
The simple solution: getting an insurance.
The majority of personal income tax evaluations done through the e-Filling system do not take a more than four minutes to complete, but as SARS happens to be under pressure to raise the revenue collection, taxpayers selected to be under tax audit is in the rise according to Willem Lombaard, MD of Tax Risk Underwriting Managers.
SARS conducted close to two million audits in the tax year of 2013/14 where close to 20,000 could be categorized as “high-risk, complicated and high-impact” cases. In order to increase returns from its audits, the Receiver gives more attention to individuals with high net worth from whom it gained more than R100-million in just 80 audits from 2013.
Companies are a subject of intense scrutiny too. In SARS’s 2013/14 yearly report, they provided feedback on their crackdown of construction firms. They completed 800 audits and raised R1.76-billion in its assessments, R192.6-million of which was collected.
SARS is expected over the next few years to take measures against non-compliant sectors in the economy which mean that any unsuspecting firm might be next, according to Lombaard.
The tax investigation insurance‘s advantage
He added that other than being under stress when selected for an audit, there are other costs associated in compliance with other audit requests and – when the audit outcome doesn’t favour the taxpayer this results to objections and appeals process.
He said that taxpayers that are unhappy with audit outcome may dispute it by going through specific processes and can also make an appeal of the objection’s outcome should it be unfavourable. However, if the specified process is not complied, the dispute may be rejected.
Tax laws and its associated legislations in South Africa are complex, and this requires adequate knowledge and sufficient skills to navigate. As a result, an average taxpayer can’t afford to hire professionals needed to adequately defend audit cases, dispute unfavourable outcomes, and appeal the case. Tax investigation insurance was developed for protection of individuals from those kinds of risks.