Roy Cokayne
The SA Revenue Service (Sars) plans to crack down on the construction sector, which had a whopping R4.7 billion in outstanding tax debt in the 2010/11 fiscal year and has been identified as the least tax-compliant economic sector in the country.
More than R2.6bn of the outstanding tax debt relates to VAT, with corporate income tax making up about R1.06bn and pay as you earn (PAYE) R972.7m.
Sars commissioner Oupa Magashula revealed in a presentation to Master Builders SA (MBSA) this month that the industry’s tax compliance record was characterised by higher rates of outstanding returns and inaccurate declarations than in other sectors, while the prevalence of non-payment compliance related mostly to corporate income tax.
Sars’ tax compliance programme document launched in April said audits showed that the industry underdeclared PAYE by 50 percent and corporate income tax by 61 percent.
In addition, 64 percent of corporate income tax returns, 36 percent of VAT returns and 28 percent of PAYE returns were not filed on time, while more than half of corporate income tax and VAT payments were made late.
“VAT under-declaration in the construction industry is of serious concern, where almost 70 percent of audited cases reveal incorrect disclosures. Our assessment suggests the biggest risks lie in the small and medium business segments, and particularly in contractors and sub-contractors involved in paving, painting, decorating, plumbing, wall and floor tiling, heating and ventilation, and ceilings and flooring.”
Magashula told the MBSA that the focus of Sars’ compliance interventions would include an increase in multitax audits, the further imposition of administrative penalties for late filing and payment, introducing an early contact strategy with non-compliant taxpayers to ensure unexpected debts did not threaten their ongoing viability, the use of multi-agency action to ensure proper governance on government tenders and improved legislation to monitor compliance.
The MBSA requested the meeting with Sars after disclosures about the level of tax non-compliance in the sector.
Sars’ compliance programme document stressed that compliance in the construction industry was even more critical because it received a significant portion of public infrastructure spending.
“Therefore our focus will be on ensuring that those companies receiving government tenders maintain their compliance,” the agency noted.
Over the medium-term expenditure framework, the government has budgeted to spend R844.5bn on public infrastructure in energy, transport, water, telecoms and housing.
Tumi Dlamini, the MBSA’s executive director, said yesterday that Magashula had mentioned that Sars would be undertaking various campaigns and mechanisms to ensure the levels of tax compliance within the industry improved.
Dlamini said Sars had indicated it would soon launch an educational campaign and other partnerships with the industry because its research indicated that a large percentage of non-compliance was due to a lack of information and ignorance on the part of small and medium-sized building companies.
Sars had “expressed a wish to work with MBSA… to educate and provide information to the industry on the requirements for tax filing, declarations and payments.
“As the representative body of the building industry, it is our role to promote and protect the interests of the industry. We will work with Sars on awareness campaigns, specifically in regard to small builders, to improve the compliance and the image of the industry,” she said.
Dlamini said the two organisations had agreed to a follow-up meeting to consider Sars’ proposals on joint initiatives to monitor and encourage compliance but a date for this meeting had not yet been set.
Adrian Lackay, a Sars spokesman, said yesterday that a framework of co-operation between Sars and the MBSA was being finalised.