080310 The new offices of SARS at corner Rissik street and Albert street. Picture: Ziphozonke Lushaba

The new IT14SD reconciliation process introduced by the SA Revenue Service (Sars) will have a negative effect on taxpayer morality, the SA Institute of Professional Accountants (Saipa) said on Monday.

“This approach, in our opinion, fails the test of legality and will have an extremely negative effect on taxpayer morality,” Saipa's national tax and Sars stakeholders committee's chairman Ettiene Retief said in a statement.

“I want to emphasise that while Saipa supports the principle of reconciliation and Sars's right to identify risks, the method it is using is highly questionable.”

Retief said the process was “even illegal” as it denied taxpayers the right to administrative action.

The IT14SD form requires companies to reconcile their annual financial statements and IT14 return against returns previously filed with Sars relating to VAT, customer and employees' tax.

“While I think the idea behind the IT14SD is good, the implementation process is extremely worrying.”

Retief said Sars had not given sufficient lead time, which meant that neither companies nor tax practitioners had the systems or processes in place to perform what was a “highly complex reconciliation”.

A second issue was that only 21 days were given to complete the reconciliation.

He said notices were often sent by mail during holiday periods.

“Because they are system-generated, there is no individual assessor to approach for an... extension.”

He said there was an inherent complexity in such a reconciliation.

“Smaller companies already find their resources stretched to fulfil all their compliance obligations dealing with a new and complex obligation like this one is a tall order,” said Retief.

“And larger companies with adequate resources have correspondingly more complex financial affairs. They too find the obligation onerous, especially within the short time frames.”

Retief said nobody was prepared to attempt the IT14SD on their own, which put a huge strain tax practitioners.

Sars had adopted an “extremely aggressive” stance with regard to penalties for non-compliance, he said.

“Failure to comply with an IT14SD assessment will trigger an additional assessment that simply denies all the deductions and allowances claimed against income tax.” -Sapa