Sars has recently reversed penalties for non-compliant trustees, raising questions about its enforcement strategy. This article explores the implications of this decision and what it means for the future of trust compliance in South Africa.
It could not have been easy for Sars to wave goodbye to more than R 70 million by writing off the first wave of penalties recently issued to trustees for non-compliance, as Sars currently relies on a narrow tax base, with only 13.2% of the Personal Income Tax population producing more than 50% of SA’s total tax collections. That is not sustainable and presents a concentration risk for Sars. Sars cannot squeeze more tax from a stagnant tax base, with many people not even paying tax because they fall below the tax threshold. Sars' focus (as continued by Sars' new Commissioner, Dr Johnstone Makhubu) is clear: to broaden the tax base and zoom in on provisional taxpayers, especially those who use trusts and receive income. This will be done by focusing on non-compliance. The recent introduction of penalties for trust non-compliance demonstrates Sars' plan. It is therefore important to understand why Sars has reversed the first penalties issued for non-compliant trustees, given its focus on trusts.
