Closing the gap between taxpayers and tax practitioners
Seven factors contributing to the expectation gap between taxpayers and tax practitioners in SA
A good relationship and effective communication between taxpayers and tax practitioners, as well as knowledge on tax requirements are among the factors that are likely to contribute towards better tax compliance in the South African context, according to a recent study.
The study on the tax practitioner-client relationship was conducted by Professor Gerhard Nienaber for his PhD thesis and submitted to Norton Rose and SAIPA’s 2014 Tax Thesis Competition.
“The study confirms the fact that tax practitioners play an important role in influencing the behaviour and attitude of their clients on tax compliance, and vice versa,” says Economic Research Analyst for South African Institute of Professional Accountants (SAIPA), Dr Thomas Höppli.
“Given the increasing utilisation of tax practitioners in South Africa, it is important for both tax practitioners and taxpayers to understand the factors that drive taxpayers’ and tax practitioners’ behaviour in order to improve the relationship between them,” says Höppli.
As Nienaber notes, the number of South Africans using the services of tax practitioners is on the increase. But, exactly how much non-compliance to tax laws is related to the tax advice that some tax practitioners give to their clients is still unclear.
The seven Cs
According to Nienaber’s study, the following “seven Cs” are factors that contribute to the expectation gap between taxpayers and tax practitioners in South Africa.
“For tax practitioners, more clarity on these factors would make them more aware of ethical issues, and this could result in more accountable decision-making,” says Höppli. “The Tax Administration Act (2011) requires tax practitioners to be registered not only with SARS, but also with a recognised controlling body, such as SAIPA. For taxpayers, this gives them assurance that their tax practitioner fulfils minimum qualifications, experience and CPD requirements and abides by a code of ethics and conduct. The regulatory framework thereby ensures that taxpayers receive better, more consistent tax advice.”
1. Communication: Frequent and clear communication should take place before, during, and after the tax service engagement between the taxpayer and tax practitioner. “Ongoing communication helps to clear up any issues that may arise between the two parties and promotes greater tax compliance,” he says.
2. Capability of taxpayers and tax practitioners: The capabilities of both taxpayers and tax practitioners should constantly be improved. This can be achieved by improving taxpayers’ knowledge on basic tax matters in order for them to understand tax processes better, as well as by improving tax practitioners’ competence. “To this end, SAIPA’s Centre for Tax Excellence (CoTE) offers a variety of specialised tax CPDs to keep their members abreast of new information and developments in the tax discipline,” he says.
3. Confusion on the nature and scope of tax service: The professional role and responsibilities of tax practitioners, together with the nature and scope of the tax service, should be clearly and openly communicated to taxpayers in order to minimise confusion. It is advisable to reduce the responsibilities and the scope to writing.
4. Comprehension of fee structure: The fee structure should be transparent in order for taxpayers to understand it better and eliminate misconceptions.
5. Contribution of external influences on taxpayers: In order to avoid external influences that create confusion amongst taxpayers, Höppli says: “Tax practitioners should identify such possible influences and address them by means of suitable communication.”
6. Collecting agent’s systems and processes: The role and responsibilities of SARS should also be openly and clearly stated in order to enlighten taxpayers on its systems and processes. “Although the buck stops with the taxpayer, a good tax practitioner should do all he or she can to ensure the client understands how SARS works,” he adds. “This will help to streamline tax collection and eliminate unnecessary non-compliance and consequent penalties.”
7. Compliance behaviour of taxpayers and tax practitioners: If taxpayers have an attitude of tax compliance, they tend to be open to and adhere to the tax advice provided by the tax practitioners. The alignment of the tax compliance behaviour of taxpayers and tax practitioners serves as an alleviating action for the expectation gap.
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