Improving the administration of donations tax in South Africa

Abstract

Background: Compliance with donations tax regulations in South Africa is a burdensome process, which may lead to taxpayers inadvertently evading this tax liability.
Aim: The article aims to recommend practical actions, through implementing technology, that can be taken by the South African Revenue Service (SARS) to improve the current administration of donations tax. The South African Revenue Service’s current effectiveness in donations tax administration and the incidence of donations tax avoidance, as perceived by tax practitioners, are also explored in support of making the recommendations.
Setting: Presently, donations tax does not form part of the e-filing system, and returns must be submitted through the SARS Online Query System. Improving the donations tax administration process may minimise the possibility of taxpayers not declaring donations and evading a tax liability.
Method: A quantitative approach was followed by collecting data through a questionnaire from registered tax practitioners. Data were analysed using descriptive statistics with some thematic analysis on open-ended responses.
Results: The results suggest that the manual process may contribute to taxpayers evading donations tax, while SARS fails to conduct regular audits and verifications in this area. Adding donations tax on e-filing and the use of technology and artificial intelligence will improve the process.
Conclusion: Simplifying the process for submitting and paying donations tax liabilities may increase voluntary compliance among taxpayers who display negative motivational postures. The tax administration could also improve its detection of such liabilities through the use of technology.
Contribution: Even with recent improvements in the administration of donations tax, it still includes manual interventions, and the article contributes by providing evidence from theory and practice to suggest practical improvements to the process.