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When I use a word doc

18 March 2013   (4 Comments)
Posted by: Stiaan Klue
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"When I use a word, it means just what I choose it to mean - neither more or less." - Humpty Dumpty (1797)

Towards the end of 2012 SARS initiated a national audit strategy to verify the diesel rebate claims through the VAT system. Since it was the first time the diesel rebate was audited on such a large scale, farmers and mining companies were obviously caught off guard as improper records kept by the taxpayers resultedin disallowed claims, additional tax, and the forfeiture of diesel. With regards to the diesel rebate audit SARS’ audit approach made it clear that it would follow a ‘black-letter’ approach in applying legal and operational rules.

In contrast, tax practitioners are regularly accused of the "wrong” mind set when they apply the letter of the law when interpreting and applying tax law.This was illustrated by a recent Global Tax Weekly article in which, Johan van der Walt, tax partner at DLA CliffeDekkerHofmeyr, states that, "One sometimes gets the feeling that favouring a ‘black-letter’ approach to the interpretation of tax statutes is regarded as a tell-tale sign of a tax advisor having the ‘wrong’ mind-set.”

In a recent Summit TV interview, Finance Minister, Pravin Gordhan, commented that: "Complexity [in tax legislation] comes because you have to introduce detailed legislative measures in reaction to so-called loopholes that have been exploited by advisers." If a broad approach was favoured instead, the Minister warned that there would be a continuous "action and reaction phenomenon". This would require of SARS to reactively block loopholes as and when discovered.

The Commissioner said much the same at the 2010 E&Y Africa tax conference: "Too often, tax advisers are quick to bring to our attention instances when a particular provision of the law creates practical difficulties for their clients. Very few, however, bring it to our attention when they have identified a loophole in law, choosing rather to exploit it."

Drawing on the current context of South African tax law in which the Minister and the Commissioner made their above statements, Van der Walt concludes that it appears as though following a "black-letter" approach can either suit, or offend, a revenue authority depending on whether the end-result is tax gains or tax leakage.

As tax practitioners who have to navigate through the contested terrain of tax law, the words of Lewis Caroll’s famous characters’ Alice and Humpty Dumpty ring true: "The question is”, said Alice, "whether you can make words mean so many different things”.Humpty Dumpty responded angrily: "The question is, which is to be master - that's all."

When the words of tax law can be interpreted in so many different ways, the tax practitioner, like Humpty Dumpty, should attempt to remain the master of these words, instead of being mastered by them.


Kobus Muller says...
Posted 01 April 2013
Dear Stiaan. I cannot agree more with your article above. However I think because of my extensive knowledge of the farming industry I have convinced SARS with an objecting that the amount due to a farmer client must be refunded. It was not easy but with the correct legislation and documentation they have agree to refund the farmer although he did not kept a logbook. Regards Kobus Muller
Vispanathan Pillay says...
Posted 26 March 2013
I must exploit a loophole in the tax law since it is enhances my professionalism. SARS has periodically reduced the number of allowable deductions for salaried taxpayers. What incentive is available to someone who brings a legal loophole to SARS? Clients pay for our services and tax avoidance is one of our priorities.Therefore,we must be "masters of these words" or else we will come short in our tax services.
Ilana Jansen van Vuuren says...
Posted 19 March 2013
Well said Stiaan! Thank You.
Sally M. Hansen (Fleming) says...
Posted 18 March 2013
Stiaan - you write an excellent newsletter ! Thank you.


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