Regulation is a win-win
15 March 2013
Posted by: Author: Mark Kingon & Franz Tomasek
Source: Mark Kingon & Franz Tomasek
At SARS, we believe that if you are making your fair contribution and doing the right thing, you deserve to know that everyone else is doing so too.
This is the core principle at the heart of SARS’ 2012-2017 Compliance Programme. We want to help people recognise behaviours that pose a risk to them and take measures to avoid them – thereby encouraging voluntary compliance.
A key aspect of the Compliance Programme deals with Tax Practitioners and Trade Intermediaries to address concerns we have identiﬁed.
Tax practitioners represent around three million taxpayers. We know that the vast majority of practitioners are compliant and play a positive role in shaping the compliance climate and culture – and it is with practitioners like these that we wish to partner to seek joint solutions to making compliance ever easier, both for taxpayers and the tax practices.
But there are also some practitioners that have a poor personal compliance history and who think nothing of shirking their personal tax responsibilities. Practitioners in this group have over 18 000 personal tax returns outstanding and have accumulated debt of about R260 million.
Aside from their personal levels of non-compliance, some practitioners also actively advise their clients on how to unlawfully evade taxes or they recommend schemes which are highly risky.
We know that this small group taints the reputation of all practitioners – and that the majority of honest, professional practitioners share our concern and desire to root out renegades and bring them to book.
Only 55% of practitioners are registered with a professional body. This makes focused engagement with practitioners as a group more diﬃcult. It also makes recourse for SARS, practitioner bodies and taxpayers more diﬃcult when non-registered practitioners engage in unprofessional conduct.
Another concern is that non-registered practitioners as a group appear to be more non-compliant – for instance, the average debt per case for these practitioners is more than four times that of members of professional bodies.
One of the most signiﬁcant challenges for both SARS and taxpayers is that no minimum standard in respect of qualiﬁcations or experience is required to practice as a tax practitioner and that not all tax practitioners are subject to a code of professional conduct.
From SARS’ perspective this means a great deal of time and energy is spent unnecessarily and ineﬃciently in correcting errors made by or addressing the unprofessional conduct of a small but signiﬁcant number of tax practitioners.
From a taxpayer’s perspective the unprofessional conduct of a tax practitioner may place both his/her funds and good reputation at risk. In their day-to-day work and in public forums, such as radio talk shows, SARS staﬀ members are confronted with the question of what redress is available to taxpayers for poor advice, misappropriated funds, etc.
Just some examples of this unprofessional conduct encountered by SARS when dealing with complaints from the public or when rectifying problematic tax returns include:
•Home oﬃce expenses being claimed for salary earners without proper documentation from their employer.
•"Other” expenses being claimed for commission earners even if commission is less than 50% of their income.
•Omission of income (IRP5’s not pre-populated).
•Omission of investment and/or interest income.
•Claims being made for over the counter medication and other non-medical purchases from pharmacies, despite the fact that only prescribed medication may be claimed.
•Incorrect source codes used, especially with rental proﬁt and losses.
All of these basic errors that should not be made by any properly qualiﬁed professional, are likely to place the taxpayer concerned in a diﬃcult and uncomfortable position with SARS.
It is for these reasons that a two phase approach to regulating tax practitioners has been proposed and the ﬁrst phase enacted into law. The ﬁrst phase will require tax practitioners to belong to a recognised professional body or fall under the authority of a directly relevant statutory regulator. SARS will review the minimum qualiﬁcations and experience requirements, CPE requirements, codes of ethics and conduct and disciplinary procedures of a professional body seeking recognition. This phase, which will leverage existing bodies, will provide a framework to ensure that tax practitioners are appropriately qualiﬁed and that a mechanism is available, both to taxpayers and SARS, to ensure that misconduct is addressed.
The second phase will be the establishment of an independent regulatory board for tax practitioners. It will begin in 2014 with a review of the success or otherwise of the ﬁrst phase.
SARS is running an engagement process with professional bodies around the requirements for the registration of tax practitioners as required by law. Watch the SARS website for more detail.