New law puts taxpayers on the back foot
25 February 2013
Posted by: SAIT Technical
By Prof Matthew Lester (Tax Talk)
TEN years ago this month, then-finance minister Trevor
Manuel announced the offshore tax and exchange control amnesty. More than
40,000 taxpayers came clean on billions illegally concealed offshore.
One wonders how much tax has been paid on the declared
capital. Yes, all were winners. On October 1 2012, the Tax Administration Act
came into effect. It contains tough provisions dealing with tax evasion.
Fair enough. But even an "honest mistake” can leave the
errant taxpayer subject to enormous fines with little scope for clemency.
Reading legislation is one thing, but lecture on the
subject and you learn a lot more. Over the past month, I have been lecturing on
the act to chartered accountants. Every time I take to the podium, I discover
more frightening practical implications in the act.
Heaven knows how the delegates feel. Many are already
experiencing huge problems that they are not skilled to cope with. The bottom
line is taxpayers and the tax profession are not ready for the act. And there
are going to be some expensive mistakes.
The Treasury and the South African Revenue Service (SARS)
would rebut that there are plenty of counterbalances in the act to protect the
taxpayer. That is true. If taxpayers can afford specialists, they can use the
act to jerk SARS around. And many will.
But this is of little comfort to taxpayers and advisers who
can only afford a call to the SARS national call centre. Furthermore, the act
contains no transitional provisions dealing with disputes arising before its
implementation. And SARS is not hesitant in adopting the line that its hands
are tied by the act and it cannot help the errant taxpayer.
Asking for tax breaks from Pravin Gordhan in next week’s
budget speech is futile in the current economy.
Good luck to him in balancing his words to have the fairest
impact on all South Africans. But imposing huge fines on errant taxpayers is
not going to balance the budget.
We must hope he looks at softening the full impact of the
act for another year while we get to grips with it. Otherwise, there will be
much gnashing of teeth. Past cooperation between SARS and taxpayers has worked
far better than the heavy-handed approach.