How to deal with a raid by the taxman
26 September 2012
Posted by: SAIT Technical
By Prof Matthew Lester (Tax Talk)
CAN SA Revenue Service inspectors raid a taxpayer's business premises at any time of the day or night and carry on as they wish?
No! SARS can raid a taxpayer's business premises but must observe a strict set of procedures before, during and after a raid.
Step 1: SARS who? The taxpayer has the right to inspect the SARS official's identity card. This is important as there have been more than a few instances of fraudsters posing as SARS officials.
Step 2: What does SARS want? If the answer is that SARS wants to inspect the books and records then the hard-ball answer is, "Go away and make an appointment giving 10 days' notice and providing five days' opportunity for the taxpayer to respond and reschedule the date.”
SARS may be simply checking for identity documents and tax registration numbers. If so, cooperate; SARS is within its rights.
Step 3: If SARS persists in not requesting an appointment and in trying to gain immediate access, the response is, "Produce a court order or get lost.”
Step 4: This is the controversial new procedure whereby SARS can authorise its own officials to raid. But the taxpayer must be presented with a document, signed by a senior SARS official, saying the revenue service has identified an immediate risk of the destruction of records or the removal of assets from the premises.
Once SARS has gained access to the premises, the officials must show a strict regard for decency and order. The taxpayer is in turn obliged to provide reasonable assistance to SARS in the conduct of the investigation.
A taxpayer's home cannot be raided unless it is used for business purposes.
"Reasonable assistance” does not include handing out tea, coffee and sticky buns. SARS has a zero-tolerance policy towards gifts. Access to a desk, photocopier and the loo will suffice.
If SARS demands a few thousand photostats, the taxpayer has the right to recover such costs from SARS.
If SARS wants to remove books and records from the premises, maintain a signed inventory thereof. SARS is obliged to grant the taxpayer access to these records.
Don't even try to debate "client privilege”. Simply demand that contentious documents are sealed in envelopes provided by SARS and the issue of privilege can be dealt with by the legal nerds later.