How SARS selects its honourable guests
07 February 2013
Posted by: Erich Bell
The Value of Your Rights
With the commencement of the Tax Administration Act (TAA) it has put in place the necessary procedures to balance the powers and duties of SARS with the rights and obligations of the taxpayer. The TAA has identified the importance of taxpayers’ rights. An administrative action can be defined as a decision or lack thereof that may affect the rights of an individual.
The taxpayer’s duties
A taxpayer does not lose any of his rights when he is selected for an audit or investigation. When such an audit or investigation takes place, the taxpayer has to comply with certain requirements.
These requirements may start with SARS requesting a taxpayer or other person to submit any relevant material within a reasonable period. The request of material from a person other than the taxpayer will be limited to the records maintained by the person. This information will have to be submitted to a specified place and within a specified time period. The time period for submission would only be extended if the taxpayer has reasonable grounds to request an extension. The designated SARS official may request that the information must be provided under oath or solemn declaration.
A taxpayer may also be requested to attend a meeting with a senior SARS official on a specified time and place for the purpose of being interviewed. During the interview the taxpayer will have the opportunity to clarify certain issues. A person may decline to attend such an interview only if the distance to be travelled is greater than 200km, as prescribed.
When the audit is conducted at the taxpayer’s premises, he will have to adhere to certain rules and regulations. The SARS Official has to give prior notice, of at least 10 business days, to the taxpayer when requesting entrance to a specified premise. The notice will also indicate the initial basis and scope for the audit. The audit will take place during normal business hours. During the audit an official may not enter the house or part of a dwelling used for domestic purposes without the occupant’s consent. The appropriate facilities will need to be made available during the time the audit is carried out. A person is also obligated to answer any questions relating to the audit or submit any relevant material.
The failure by a taxpayer to adhere to these rules will expose him to possible criminal prosecution. These powers of SARS are not subject to the normal objection and appeal process.
The aim of SARS is to increase the tax compliance of taxpayers and to put an end to tax evasion and tax avoidance schemes.
SARS is obligated to act in a lawful and fair manner when performing audits. There are a number of different ways SARS selects the cases for possible audits, namely:
1. Random selection. This method will allow that all taxpayers have an equal chance of being audited. Ultimately all the cases on SARS’s register will be investigated within a given period.
2. Specific referral by other departments within SARS. This method allows the different administrative departments within SARS to recommend a taxpayer for an audit.
3. Specific referral by the general public. This method provides means to the general public to make use of the fraud hotline to alert SARS about suspected irregularities. People with inside information about your business or someone with a motive of revenge may leave an anonymous tip with SARS by leaking out information.
4. Discretionary selection. This is where SARS selects a specific group or industry for audits. Industries that receive increasing media attention may increase the likelihood of being selected. A good example was the selection of the Porsche Club and its members.
5. Computer generated selection. SARS makes use of a computer program that is programmed with the necessary criteria. The program then selects candidates which comply with the criteria. This method is only applicable to VAT Vendors.
6. Refund Audits: This method comes into work when the criteria for refund audits are met. Alarms usually go off when a refund exceeds a certain amount for the specific category of taxpayer.These audits are performed to ensure that the refunds are complete and accurate.
SARS is set to perform its duties in a cost-effective manner with regard to good values and principles. As SARS is placed under the spotlight, they will strive to respect the rights of the taxpayer.
Source: Ronel de Kock