SARS Is Getting Tougher
30 August 2012
Posted by: Author: Malcolm Rees
SARS Is Getting Tougher
Imminent new tax laws geared towards improving South Africa’s revenue collection numbers will give SARS significant new investigative and punitive powers. If you weren't already wary of the taxman, it is now time to "get very scared”.
The powers will come into effect with the Tax Administration Bill (TAB) which is expected to be promulgated by the beginning of August, according to Dr Beric Croome, a tax executive at law firm Edward Nathan Sonnenbergs.
"If tax payers appear on the radar of SARS for non-compliance or suspicion of non-compliance, they will very quickly find out the added powers that SARS enjoys as a result of the amendments”, says Ernie Lai King, also a tax executive at ENS.
Notable new powers provided to SARS under the drafts include:
•The right to issue a jeopardy assessment compelling the payment of tax prior to the normal returns due date;
•The right to apply to the courts for a preservation order to seize the moveable assets of the tax defaulter; and
•The widening of search and seizure powers so that a warrant is not always necessary.
A jeopardy assessment can be issued to a taxpayer when SARS has reasonable suspicion that the collection of tax is in jeopardy. This would typically occur where the tax payer has previously failed to submit a tax return or has filed an incorrect tax return. "SARS can issue a jeopardy assessment in advance of the date in which the return is normally due”, says Lai King. "You may have to pay prior to submitting a tax return”.
A preservation order "may be made in respect of assets if SARS suspects such assets may be dissipated to frustrate the collection of any tax due. The court can authorise a seizure of moveable assets, or they can appoint a curator bonis (legal guardian), and that will mean that the assets will vest in the curator so you are no longer able to freely deal in those assets”, says Lai King. This would typically occur where a taxpayer has defaulted on payments.
Under search and seizure amendments, SARS can, under certain circumstances, enter a premises and search and seize without a warrant.
While SARS would initially need to apply to a judge for a warrant, Lai King warns that "in carrying out the search, should SARS on reasonable grounds believe that relevant material is not on the premises mentioned in the warrant … they can simply go onto other premises without a warrant, if they believe evidence is at risk of been destroyed. There is a concern that overzealous assessors may abuse and overstep their powers”.
In addition, the sections that replace those covering the harsh Section 74C enquiry provisions still have no time limit in which SARS will have to wind-up the enquiry and provide findings.The provisions authorise SARS to hold an enquiry into the affairs of an individual suspected of non compliance with tax laws. "It's a very, very harsh enquiry—and it's a costly thing to attend, because you need good legal representation," says Lai King.
Under the provisions, SARS can subpoena an individual for any information required, and they can call in any other individual to testify under oath as to the activities of the individual under investigation. But "there is no time limit specified … they can just keep you on a string”, warns Lai King.
The extent of the new powers being provided to SARS has led to concern that even tax-abiding citizens could be subjected to unduly harsh treatment. "SARS have to collect the petrol to make the engine run, and SARS from their point of view and in their reality, find people who are really dishonest. SARS argues that they must have these very vast powers to combat that”, says King.
But "from our point of view, we see people pulled into investigations that shouldn't be, and they are subjected to treatment that is not warranted. It's fine if we say that this only affects the bad guys, but sometimes the good guys are mistaken for bad guys as well," says Lai King.
Source: By Malcolm Rees from Moneyweb (Taxbreaks)