By Linda Ensor (Business Day)
Executive summary (SAIT Technical)
SARS has rejected requests by tax practitioners that the draft TAAB should grant professional privilege to tax practitioners. SARS argues that tax practitioners are regulated by self-constituted professional bodies and not by law and that regulation by law is a prerequisite for granting limited privilege. Various persons expressed disappointment at SARS's decision.
THE South African Revenue Service (SARS) has rejected pleas by tax practitioners that the draft Tax Administration Amendment Bill should include provisions to grant them the same professional privilege as enjoyed by lawyers.
This privilege would render confidential the information shared between tax practitioners and their clients, and not liable to seizure by SARS.
The reason given by SARS to members of Parliament’s standing committee on finance on Tuesday was that tax practitioners in South Africa largely relied on regulation by self-constituted professional bodies and not by law.
Regulation by law would be a prerequisite for granting limited privilege to tax practitioners.
SARS group executive for legislation and policy research Frans Tomasek said the matter would be revisited when the model of regulation was evaluated in about 18 months. SARS also rejected a proposal that the penalty system for taxpayers with taxable income over R1m who made inadequate estimates of their second provisional tax payment be retained. This penalty is capped at a maximum of 20% but SARS wants to apply a fixed 20% penalty.
Mr Tomasek said the fixed 20% penalty would ensure all provisional taxpayers were treated equally. But an amendment would be introduced into the bill which would allow SARS to waive part or all of the penalty if it is satisfied that the estimate was a serious calculation and not a deliberate or negligent understatement. Mr Tomasek noted that a 20% margin of error was allowed for the estimated tax payment.
With regard to proposals regarding the regulation of tax practitioners, SARS has accepted the suggestion that tax practitioners be given more time to register with a controlling body, and has proposed that this requirement should come into effect on April 1 next year.
Democratic Alliance finance spokesman Tim Harris said that SARS’s decision not to provide for legal professional privilege was "disappointing” as there appeared to be several "tangible benefits” to granting this privilege.
"Such privilege exists in several other jurisdictions such as New Zealand and the US and there seems to be a case for considering it for inclusion in this round of legislation,” he said.
PwC tax partner Osman Mollagee argued that it was in the public interest to encourage taxpayers to communicate with their tax advisers in the comfort that such communications would be confidential and protected.
It was unfair for the tax advice given by lawyers to be protected but not that of tax practitioners, Prof Mollagee said.
Also, tax practitioners had a right to act for their clients in the Tax Court.
"To suggest that confidential correspondence between a taxpayer and a tax practitioner representing the taxpayer in proceedings in the Tax Court should not be subject to the same legal privilege that would be enjoyed between a taxpayer and a lawyer in identical circumstances raises serious constitutional questions”, Prof Mollagee said.