Tax Administration Act Will Soon Come Into Operation
10 September 2012
Posted by: Author: Sophia Brink
Tax Administration Act Will Soon Come Into Operation
The Tax Administration Bill was promulgated as the Tax Administration Act, 2011 (Act No. 28 of 2011) on 4 July 2012.The drafting of the Tax Administration Bill started in 2005.
The 2005 Budget Review announced the Tax Administration Bill as a project to incorporate into one piece of legislation certain administrative provisions, which are currently duplicated in the different tax acts.After two rounds of public consultation on the Tax Administration Bill and consequential amendments the Tax Administration Bill, 2011 was introduced by the Minister of Finance on 23 June 2011 and on 24 November 2011, the Tax Administration Bill, 2011 was passed by the National Assembly in Parliament.
The Tax Administration Bill was a preliminary step in rewriting the Income Tax Act No. 58 of 1962, since the administrative part of the Income Tax Act comprises about 25% of the Act.Once the Tax Administration Act comes into operation, administrative provisions contained in the Income Tax Act and other fiscal statutes will be repealed.
Purpose of the Act
Tax legislation comprises of two aspects,namely: tax liability provisions and tax administration provisions.The Tax Administration Act deals only with tax administration.
The purpose of the Tax Administration Act as per section two is to ensure the effective and efficient collection of tax by:
•Aligning the administration of the tax acts to the extent practically possible;
•Prescribing the rights and obligations of taxpayers and other persons to whom this Act applies;
•Prescribing the powers and duties of persons engaged in the administration of a tax Act; and
•Generally giving effect to the objects and purposes of tax administration.The Act seeks to achieve a balance between SARS’s powers and duties and the taxpayer’s rights and obligations enhancing equity and fairness of tax administration.
The Act should ensure better service and lower compliance cost. In order to maintain compliant taxpayers’ confidence in the integrity of the tax system, the Act will increase SARS’s powers to go after tax evaders.SARS stated that stricter enforcement, assessment and collection powers will be imposed.
Scope of the act
The Tax Administration Act consists of 20 chapters covering the following topics:
|Chapter 1||Definitions|| Chapter 11||Recovery of taxes|
|Chapter 2||General administration || Chapter 12||Interest|
|Chapter 3||Returns and records|| Chapter 13||Refunds|
|Chapter 4||Registration|| Chapter 14||Write off or compromise on tax debts|
|Chapter 5||Information Gathering|| Chapter 15||Non compliance penalties|
|Chapter 6||Confidentiality of information|| Chapter 16||Understatement penalties|
|Chapter 7||Advance rulings|| Chapter 17||Criminal offences|
|Chapter 8||Assessments|| Chapter 18||Reporting of unprofessional conduct|
|Chapter 9||Dispute resolution|| Chapter 19||General provisions|
|Chapter 10||Tax and liability payments|| Chapter 20||Transitional provisions |
Key features of the act
SARS highlights the following as being key features of the Tax Administration Act:
•A phased move to a single registration process and number across taxes, to reduce red tape and streamline the system, and self assessment of taxes, so taxpayers need not wait for an assessment.
•Greater access to third party data, to underpin SARS’s initiatives such as the pre-population of individual tax returns.
•Clearer rules on SARS’s access to information, so tax liabilities can be determined more quickly and accurately.
•The ability to search business premises without a warrant in narrowly defined situations where the general requirement for a warrant would defeat the object of the search, so SARS can act when tax is at serious risk and time is of the essence (Section74D of the Income Tax Act that requires the Commissioner to apply to the High Court for a warrant authorising the search of premises and seizure of documents will be repealed once the Act comes into operation).
•Clear requirements and timelines for the issue of tax clearance certificates, to provide greater certainty and responsiveness to business.
•Feedback on audit progress and findings, to engage more fully with taxpayers and ensure they understand the reasons for any adjustments.
•Specific time frames for decisions of the Tax Board (a small claims court for tax) and wider reporting of tax court decisions, to improve access to justice.
•The appointment of a tax ombud, informed by international experience, to provide taxpayers with a low-cost mechanism to address administrative issues that could not be resolved through SARS’s normal channels (although the Act provides for a year from its commencement for the appointment of the tax ombud, the Minister of Finance announced in his 2012 Budget Speech that the person will be appointed this year).
The Tax Administration Act would come into operation (as prescribed by section 272 of this Act) on a date to be determined by President Jacob Zuma by proclamation in the Government Gazette.According to SARS, its preparations for the implementation of the Act are at an advanced stage and it anticipates that it will come into operation within the next three months.
References - SARS; Tax Administration Act No. 28 of 2011
Source: By Sophia Brink (TaxTALK)