South Africa's Revenue Service (SARS) has processed over R21 billion in withdrawals from the two-pot retirement system, but a significant number of applicants attempted to evade their tax obligations, the agency revealed in a statement on Friday.
The announcement follows the processing of over 1.2 million applications for tax directives, with a substantial portion of these applications ultimately approved.
SARS confirmed that a total of 1,213,646 applications were received for tax directives related to withdrawals from the two-pot system's savings withdrawal benefit. Of these, 1,148,729 were approved, releasing funds to the applicants.
The remaining applications were rejected, primarily due to errors in identity or tax numbers. The agency emphasised that despite the high volume of applications, the total gross lump sum paid out to date stands at a considerable R21.4 billion.
The process, SARS explained, involves issuing a tax directive to the fund manager after a registered taxpayer successfully applies for a withdrawal. This directive specifies the amount of tax to be deducted.
Before the final payment is made, the pension fund also deducts any outstanding debt owed to SARS. However, individuals with existing debt arrangements with SARS will not see their withdrawals affected; the debt will be deducted according to the pre-existing arrangement.
SARS Commissioner Edward Kieswetter expressed serious concern regarding a significant number of taxpayers who attempted to manipulate the system to reduce their tax liability.
"SARS is deeply concerned that 213,654 taxpayers have been identified where they have declared incorrect taxable income with the view to have a more favourable tax rate. If a taxpayer understates their income, they are intentionally involved in evading their tax obligation," Kieswetter stated.
He warned of penalties for such behaviour: "A penalty will be imposed on taxpayers who have understated income. Finally, I wish to caution taxpayers to refrain from this conduct that borders on criminality, as there are real consequences for this behaviour."
He added that the marginal tax rate on withdrawals ranges from 18% to 45%, depending on the individual's income bracket.
SARS highlighted its commitment to digital channels for processing two-pot withdrawals, citing the success of its online tools.
"In line with SARS's intent for taxpayers to use digital channels, SARS is happy to announce that the simulated WhatsApp calculator has been used 51,547 times since implementation of the process. The simulated calculator on the SARS website, which forms part of the SARS online query system, has been used 655,801 times," the statement read.
The agency also acknowledged the significant contribution of retirement fund management entities, thanking them for their cooperation in efficiently processing the high volume of tax directives. In addition to the digital platforms, SARS received 53,519 queries via its voice channel and 8,655 queries at its branches. The agency encouraged continued use of digital channels, emphasising their convenience and user-friendliness.
"Taxpayers are encouraged to continue to use the digital channels, which are simple, easy and user-friendly. Using these channels means taxpayers do not have to leave their homes or places of employment to stand on undignified queues," SARS stated.
The successful disbursement of R21.4 billion under the two-pot system demonstrates the scale of the initiative. However, the significant number of taxpayers attempting tax evasion highlights the ongoing challenges faced by SARS in ensuring compliance.
