JOHANNESBURG - We have covered income tax, VAT, PAYE and capital gains tax, and as it’s filing season for most (later for some) let’s talk about that little “love letter” you have to send to Uncle Sam, or is it Uncle Mark?
Have you read the first page of the love letter (IT12)? Do you know what you are signing?
Did you know you declare that to the best of your knowledge the information provided is correct and complete? That all the income and relevant information is disclosed to Sars in the return? Also, last but not least, that you have the necessary receipts and records to support the declaration and will retain these for inspection purposes.
It’s a mouth full, and the question is, is the declaration that you are making correct, or are you blindly submitting? Do you rush in where angels fear to tread?
Companies and trusts through their tax representatives make the statement that the return is “true and correct in every respect”.
Financial statements usually state that the financial statements present fairly, in all material respects, the financial position as at the year-end date and that it has been drawn up in accordance with the International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Note that there is no reference to the Income Tax Act?
There is a substantial gap - an expectation gap - the difference between fairly presents in all material respects vs true and correct in every respect is enormous! Fairly present if we take the literal meaning is translated as a reasonable view, and materially correct is not the same as true and correct in every respect.
How much time do you spend in taking fairly presented, in all material respects, and converting it into true and correct in every respect? And converting the IFRS and Companies Act compliant to correct in every respect?
Unless I am missing something, correct in every respect leaves no room for error. It’s either correct or incorrect. In other words, every line in your tax return has to be correct per the requirements of the Income Tax Act. Remember the 1081 odd pages? The fine print, well this is where the spell is cast.
In a nutshell. You complete the return, submit the return and brag about all your income. You get issued with an assessment, you are asked for supporting documents. If there are errors and trust me there always are, then the Tax Administration Act kicks in. If for some unknown reason you don’t agree with the assessment, you object. And this is where the fun starts; you enter the realm of legal objections, appeals and dispute resolution. A Hogwarts dormitory of shifting staircases. I have to caution do not rush in where angels fear to tread.
Filing a tax return, if you are not versed in the more elegant arts of tax disclosure, is like writing a mathematics exam without ever attending a single class of algebra, it seems geek, it is geek, if you do not speak geek you are up the geek without a paddle. A word of advice, therefore, find a geek or a Dumbledore young Potter, before you plotter. We shall delve into objections and appeals and penalties in interest in a later article.
Willem Oberholzer is an executive director at Probity Advisory.
The views expressed in this column do not necessarily reflect the views of Independent Media.