A tax audit by SARS can be scary if you're not sure what to expect. The sad reality is that most businesses will face a tax audit at some stage, as SARS is clamping down on compliance - especially now that SARS Commissioner Oupa Magashula himself is making news headlines, which is putting SARS processes under the spotlight. Here's how to make sure you're in the all clear for a tax audit, by employing SARS' own analysis techniques to your financial records!
The Minister of Finance, Pravin Gordhan, has released a statement today that SARS is a crucial fiscal institution that is highly respected within and outside South Africa.
This comes after a number of media commented yesterday that there's been a fundamental breach of SARS processes based on a tape recording of allegedly of SARS commissioner Oupa Magashula where Magashula appears to offer a job to an associate of a convicted drug dealer, says The Mail & Guardian Online
So while Gordhan is going to appoint a retired judge to establish 'whether there was any breach of SARS processes, good governance, the nature of any possible indiscretion and to advise on appropriate remedies where breaches may have occurred', it's your business that will bear the repercussions.
Expect harsher tax audits as SARS' own processes come under the spotlight…
So SARS is sure to increase its tax audits on businesses to ensure compliance, as a result.
And taxpayers won't be able to resort to 'bullying tactics against SARS officials' to prevent the pursuit of investigations as prescribed by the law, says SARS.
But don't worry, it's easy for your business to pass a tax audit with flying colours.
SARS will compare the information your company submitted to it from all sources.
It then compares this to your company's annual financial statements, Vat returns and tax returns as well as any tax certificates and disclosures made on those returns, says FSP Business
If that doesn't put you at ease, have a look at your financial records based on the analysis techniques SARS uses in a tax audit.
Seven analysis techniques SARS will use in a tax audit to check for irregularities…
SARS will use ratio analysis to check your stock turnover ratios.
SARS will also check what your debtor turnover ratio says.
SARS'll use asset ratios to determine asset use
SARS'll analyse your financial structure with capital ratios.
SARS will also conduct a profitability analysis.
SARS will take into consideration your cost of sales.
Lastly, SARS will analyse your business profit and loss in a tax audit, says InspiringWomen.
Apply these techniques to your financial records today to see if there are any irregularities.
Then use your findings to fix them, so that SARS will see you as compliant in a tax audit!