Cape Town - South African tax payers and companies better beware that an increased revenue budget is likely to bring an increase in tax audits, according to Mmangaliso Nzimande, Africa tax controversy leader at EY.
Treasury indicated in the mini budget last year that it will raise an additional R28bn through taxes.
"Any increase in tax rates or implementation of a new tax will likely result in increased audit activity by the SA Revenue Service (SARS). The new administrative requirements on taxpayers and increased audit activity will be governed by the Tax Administration Act," said Nzimande.
"This will bring with it an increase in disputes between taxpayers and SARS. As such, Minister of Finance Pravin Gordhan may announce an extension of days for taxpayers to file documents in the dispute process."
Given the potential for increased tax audits, taxpayers need to not only assess their tax risk profile and identify possible risk areas, but also proactively manage these. This focus on tax risk management will assist businesses in achieving higher levels of control, visibility and reduce an organisation’s tax risk, in Nzimande's view.
READ: Budget 2017: Experts share tax predictions
"In my view an increase in the tax rate won't be sufficient to raise the additional R28bn, so government would have to increase measures to see where it can find more money. Increased enforcement is one such a measure," Nzimande told Fin24.
He expects more audits also for companies, although he does not expect corporate tax to be increased. He expects audits could also focus on transfer pricing in order to try and raise more revenue.
"This year the amount of revenue government has to raise is much higher. The slowing economy is the main factor putting pressure on the revenue budget," said Nzimande.
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