Financial and Tax Wisdoms

Some taxpayers do not claim their refunds due to tax ignorance."These are the lower income earners, the very ones that government has indicated that they wish most of the tax relief to go to."

 

While taxpayer education was definitely something that the South African Revenue Service (SARS) had been working on, the aim of the education was primarily to ensure that people paid their taxes," she added.

Arguably, there had been little or no education for those who had paid taxes and were due a refund because their earnings were under the tax threshold (the level of earnings on which tax becomes taxable).

"Those affected are the students who are paying their way through varsity by doing casual work and the man on the street who cannot get permanent work and therefore works on casual basis at different employers," Andhee said.

Most of these people earned under the tax threshold, she added.

"There are thousands of people who fit into this category.

"This tax year, the tax threshold is R57 000 - so people who fall under this threshold do not pay taxes."

However, she said casual workers were generally taxed at 25 percent on the very first cent that they earned.

"These individuals should therefore receive their taxes back but the only mechanism for them to do this is to register as a taxpayer and file a tax return."

She said that arguably, not even 10 percent of these individuals knew that they could claim their taxes back.

"This is a failing on SARS's side as well as that of employers.

"Failure by SARS to educate individuals of their rights is not defensible."

Andhee said that in order to obtain a refund, one needed to register for taxes and file a tax return.

"For those individuals who now wish to claim their refunds for the last few years, the same process needs to be followed.

"The problem that they will probably face is that the SARS computer system will impose a penalty for late registration and late filing of tax returns."

Andhee said that alternatively, if they went into the tax office, it was likely that the official would refuse to register them because they were under the threshold.

"SARS should consider a simplified manner to deal with these individuals," she said.

One method for SARS to consider was to use the individual's bank details on the employees' tax certificate.

At the end of the year, SARS could then send a letter to the taxpayer at the address stipulated on the certificate requesting that these individuals declare whether or not they have earned any income from other sources.

"To the extent that they are actually under the threshold, the taxes should be refunded," Andhee said.

Alternatively, the withholding rate of 25 percent should be substantially reduced or removed in total, she added.

"The fiscus has been financially benefitting from the ignorance of taxpayers for several years.

"Steps now need to be taken to educate and enable people to rightfully claim back their taxes."