Tax advisers welcome ‘more predictable’ penalty system
08 January 2013
Posted by: SAIT Technical
By Amanda Visser (Business Day)
The TAA is more understandable, objective and predictable than the previous regime. Under the old regime, SARS had a discretionary power in terms of the Income Tax Act to levy additional tax of up to 200%. The new regime places the taxpayer's case in a matrix and the scope for variation is much smaller, as the criteria for the behaviour associated with the penalties are described in the act.
Tax Administration Act is far more understandable and objective and creates more predictability than the previous regime, according to tax consultants who have welcomed the new system, saying it offers a large incentive for all taxpayers.
Individuals and companies would escape any penalties if they disclosed noncompliance before being "caught out" by the South African Revenue Service (SARS).
Johan van der Walt, a tax director at law firm Cliffe Dekker Hofmeyr, said the new system introduced more predictability, transparency and consistency in applying penalties.
Under the old regime, SARS had a discretionary power in terms of the Income Tax Act to levy additional tax of up to 200%.
"It was not inconceivable that a taxpayer could get a penalty of 50% at one tax office, yet with the same set of facts would have received a penalty of 100% at another office. This new regime places the taxpayer's case in a matrix and the scope for variation is much smaller, as the criteria for the behaviour associated with the penalties are described in the act," Mr van der Walt said.
Once a taxpayer's conduct has been identified in terms of a new table in the act, the onus is on SARS to prove that the conduct has been correctly identified.
SARS explained in its guide to the Tax Administration Act that the "open ended" discretion to impose additional tax of up to 200% was replaced with the "understatement penalty framework that is aimed at ensuring consistent treatment of taxpayers in comparable circumstances". The act applies to all taxes administered by SARS.