With the annual tax filing season well underway, the South African Revenue Service (SARS) seems to be pulling all the stops to get back on track and to collect taxes in an efficient and effective way, says Ettiene Retief, Chairman of the National Tax and SARS Committee at SAIPA.
 
The near disastrous changes to the operating model of the tax authority under the management of suspended commissioner Tom Moyane has led to a decline in tax morality and revenue collections.
 
Acting commissioner Mark Kingon has however vowed to tweak things to collect the taxes government needs.
 
Tweaking the model
Retief says structural changes made under Moyane include the dismantling of the Large Business Centre (LBC) which focussed on large and multinational companies and high net worth individuals.
 
These two categories of taxpayers are responsible for a large chunk of the tax revenue collected by SARS. Their tax affairs are generally complex and hold risks for the fiscus if it is not managed properly.
 
The reasoning behind the dismantling of the LBC was the unnecessary duplication of resources. “The LBC has a clear role to play in operational efficiency and effectiveness,” says Retief.
 
Transfer pricing practices in cross border transactions offer opportunities for base erosion and profit shifting. “Surely a transfer pricing unit that can focus at that level is a far more efficient use of resources and the management of tax risks,” says Retief.
 
“Any large business will tell you how frustrating the process has become when dealing with complex matters with officials who do not have the experience to deal with it properly.”
 
Retief says SAIPA fully supports the refocus on the LBC and the re-establishment of certain functionalities which will allow SARS to collect revenue in a far more efficient and effective way.
 
The tax affairs of rich South Africans equally require specialised skills since the risks are vastly different to that of an average taxpayer. They generally have complex trust structures, deductions for venture capital company investments, loans and beneficial ownerships that requires a different set of auditing skills.
 
Auditing capabilities
Retief says there is sufficient causal evidence that there has been a deterioration of auditing efficiency. The audit of an average taxpayer is not supposed to take more than four months.
“There has to be a balance between an efficient auditing process and happy taxpayers who are not unduly frustrated or disadvantaged.”
 
Retief says SARS will have to restore the faith taxpayers had in the tax authority and how it collects taxes. Government needs to gain taxpayer’s trust in how it is spending their money.
There must be a change in the ethos of the business. Taxpayers who are complaint should be respected. However, painting everyone with the same non-compliant brush serves nobody.
 
Shorter time to file
SARS has proposed a shorter filing season for non-provisional taxpayers to enable it sufficient time to complete its verification and audit processes.
 
Filing season will close at the end of October for taxpayers who are using the electronic filing platform offered by SARS. Provisional taxpayers still have until the end of January. Retief supports the shorter filing season, saying it will lead to a natural increase in compliance and collections.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Members of the South African Institute of Professional Accountants (SAIPA) need to be aware of the legislation involved when accepting an engagement from a public school. There are several risks involved with self-review and SAIPA members with clients in the education sector must take note of the potential pitfalls of doing the school’s “audit”.
 
A Professional Accountant (SA) may not audit financial statements, says Faith Ngwenya, Technical and Standards Executive at SAIPA. An audit may only be done by a registered auditor and conducted in terms of the Audit Professions Act. The only form of assurance service that may be offered by a SAIPA member is an independent review.
 
“Many times, a school doesn’t have the resources to prepare their own financial statements. If they have appointed a member of SAIPA for this task, the SAIPA professional must take precautionary measures to address the threat that exists when the client expects them to handle the preparation of the establishment’s financial statement as well as conduct an independent review on those same financial statements,” says Ngwenya.
 
Legalities involved with separation of duties
According to the South African Schools Act, the governing body of a public school must draw up annual financial statements in accordance with the guidelines determined by the Member of the Executive Council within three months of the end of each financial year. Within six months of the end of each financial year, a copy of the annual audited financial statements must be submitted to the heads of the regional education department.
 
The auditor/independent reviewer should not do the bookkeeping of the school, other than the year-end journals and adjustments. According to the International Standard of Review Engagements (ISRE 2400), the audit/review of the school’s financial statements must not be carried out by the same accounting professional who was involved in the preparation of the statements.
 
It is also important to note that the registered auditor performing the audit function to a school must not compile the annual financial statements. The compilation must be done by an accountant who will not be responsible for the audit or review of the same financial statements. To reduce the self-review threat that exists, members can help the school to find another accounting firm to prepare their financial statements or refer the accounting work to another professional accountant.
 
“There needs to be a clear separation of responsibilities to reduce the threat of an accountant preparing the financial statements and providing assurance on the same documents. Separate entities need to be appointed for each task, which may be challenging for small companies and sole practitioners,” says Ngwenya.
 
Collaboration is key to minimising risks
The governing body of a public school must appoint a person registered as an auditor in terms of the Audit Professions Act of 2005. If this is not reasonably practicable, it must appoint a person who is qualified to perform the duties of an accounting officer of Close Corporations (section 43(2)(a) of SASA).
 
“I believe many accounting officers will need to reduce and minimise the threat that exists if they are preparing financial documents for schools as well as providing independent reviews. Collaboration is key to protecting yourself professionally and to ensure that your client – the public school – is receiving the due diligence that is needed in South Africa.
 
SASA’s goal is to ensure that all learnings have access to quality education without discrimination and a large part of this responsibility resides with ensuring that financial documents are correct, transparent and correct. I would like to urge SAIPA members to work together and refer to each other to separate responsibilities to help minimise risks and stay in line with the new legislation,” concludes Ngwenya.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants