SARS vs. Taxpayer Rights
06 February 2013
Posted by: Erich Bell
Helping the little guy
The fight between SARS and the taxpayer seems to be unending with SARS in control. The Tax Administration Act (TAA) seeks to be in the taxpayers’ corner for better performance to even out the fighting ring.
The Tax Ombud
The TAA creates the legal framework for the creation of the Tax Ombud in South Africa. SARS has indicated that the Ombud will follow the model adopted by the United Kingdom and Canada. The appointment of an Ombud was openly welcomed. The mandate of the Ombud will be to review taxpayers’ complaints regarding service, procedural or administrative matters.
The Ombud will follow informal, fair and cost effective procedures to help taxpayers with their complaints. It will create a level of independence even though there has been a lot of discussion about this in the past. For the Ombud to be effective and efficient, it should have a strong background in both customer service and the law.
The Minister of Finance, Mr Pravin Gordhan, will appoint the Ombud and determine his terms of office. The Ombud will be funded through SARS’ budget. The Ombud has been given review, mediatory and reporting powers, but no determinative powers. The Ombud will report directly to the Minister of Finance.
The purpose of the Tax Ombud is to ultimately enhance the tax administration process in South Africa and lighten the burden on taxpayers.
Search without a warrant
The warrantless search and seizure provisions made a lot of noise when it was introduced in the TAA. Previously, SARS required a warrant to search a person’s premises and to seize any relevant material. This new principle of warrantless search and seizure may be exercised when a senior SARS official is reasonably satisfied that:
· There might be an imminent removal or destruction of any relevant material
· If SARS were to apply for a warrant, it will be issued; and
· The delay in obtaining the warrant will defeat the object of search and seizure.
It should be noted that a person’s written consent must be given before a SARS official may enter his domestic premises which are not used for trade purposes. The official may therefore not enter the person’s house or domestic premises except for the part that is being used for his trade.
A judge or magistrate may issue a warrant if satisfied that there are on reasonable grounds to believe that a person failed to comply with any tax obligation or committed a tax offence. The relevant material to be searched should likely reveal the commission of the offence or provide proof of failure of compliance.
A warrant must contain the following:
· The alleged failure to comply
· The person whom allegedly have failed to comply
· The premises to be searched
· The facts that relevant material is likely to be found at the specified premises
The SARS official must make an inventory list of all the seized materials and provide a copy thereof to the person. The search must be done with a strict regard to decency and order. A physical search of a person must be done by an official of the same gender with the assistance of a police officer.
The Tax Administration Act seeks to ensure that taxpayers’ rights are protected where a taxpayer faces a criminal investigation. The Act further requires that criminal investigations and audits are separated, ensuring that the rights of the accused are protected under the Constitution. This was previously not properly dealt with in other fiscal statutes or relevant provisions of the Income Tax Act.
SARS Audits and Feedback
The frustration of dealing with SARS in the past could have been unbearable from time to time. Days, months or even years could have passed before one would have received any feedback from them as to whether inquires and audits were adjusted or completed. Fortunately, the Act seeks to rectify this problem before it continues on too long. In the case of an audit, the Commissioner is required to advise the taxpayer on the current scope of the audit, the progress made and whether any information is still required by them.
The taxpayer will have to be informed within 21 business days after a conclusion has been reached on an audit or investigation. If there were any material problems identified during an audit or investigation, the taxpayer should also be informed within 21 business days or longer period depending on the complexity of the audit or investigation.
So it seems that the TAA helps to improve efficiency and productivity to speed up administration problems.
Grounds of assessments and objections
The purpose of the TAA is to ensure that the tax system is fair and continues to be fair, which in turn should enhance compliance. If a taxpayer is audited and the audit identifies amounts which SARS wishes to subject to tax (amounts that have been discovered and on which tax was not levied), it is necessary for SARS to advise the taxpayer and furnish the grounds or reasons for the assessment, or additional tax. In the past, SARS was not obligated to provide the taxpayer with any reasons on why they differ from the assessment.
This will have to be done within 21 business days of the assessment in the correct form and manner prescribed. The taxpayer will then have 30 days from the date of assessment to object to the assessment. Before the Act came into practice, the taxpayer had 30 days after the date of assessment to log an objection.
This will lead to a more efficient administration process and a much improved experience for the taxpayer.
Voluntary Disclosure Program
The Voluntary Disclosure Program (VDP) is a window of opportunity for individuals and corporate entities to disclose any tax defaults and regularise their tax/exchange control affairs. A tax default is simply a submission of inaccurate or incomplete information to the Commissioner which would lead to the applicant not being assessed on the correct amount of tax, an incorrect amount of tax being paid over to SARS or an incorrect refund being made by SARS.
The purpose of the VDP is to broaden the tax compliance culture, increase the taxpayer base and increase the flow of revenue to the fiscus which will be critical for South Africa’s economic growth. Successful applicants will have the benefit of reduced interest and penalties and would also avoid criminal prosecution. All tax types administered by SARS are covered except for customs and excise duties. A successful applicant will receive a written agreement from SARS containing the material facts of the default, the amounts payable and the necessary arrangements for the payments. The relevant undertakings by each party will also be included in the agreement.
If SARS discovers that the applicant failed to disclose any material matter after the conclusion of a Voluntary Disclosure agreement, the SARS official may withdraw any relief granted to the applicant, regard any payments made in terms of the agreement as part payment of any outstanding taxes and pursue criminal prosecution for any statutory offence.
Tax Clearance Certificate
Have you heard the phrase, "can we please see your tax clearance certificate?” A tax clearance certificate can become very important for individuals or corporate entities looking to apply for a contract or credit. Applying for a tax clearance certificate has always been a frustrating and lengthy process. Luckily the TAA has provided the proverbial light at the end of the tunnel. The TAA contains some new provisions that enhances the protection of the taxpayer rights. SARS is obligated to provide feedback on your status after applying for your clearance certificate within 21 business days.
Certain provisions contained in the TAA will enhance the protection of taxpayer rights by way of new provisions which were not found in other tax acts.
It remains to be seen if SARS will hold dear to their responsibilities as contained in the TAA. Another more important question might be if SARS will have the resources necessary to provide regular feedback on audits and to properly deal with the other provisions contained in the TAA.
Source: Dr Beric Croome