Advice for Tax Practitioners
10 April 2013
Posted by: Author: Prof Anneline Venter
Source: Prof Anneline Venter
"Your desire to advise other people, grows in line with your perception... that assumes you’re wiser than them.” – Toba Beta, Master of Stupidity.
In the context of tax advisory services, this is not necessarily a bad desire as long as you are actually "wiser” than your taxpayer clients. This is a great responsibility, as taxpayers come to us for advice voluntarily and assume that we have the necessary knowledge and "wisdom” to safely guide them on the path to necessary compliance.
Taxpayers are not alone in their perception of our wisdom, the tax authorities are now starting to actually demand a certain level of wisdom from us, as they have high stakes in the taxpayer eventually reaching the compliance goal. Since we as tax practitioners can be a convenient scapegoat for everything that can go wrong in the quest for compliance; let us make sure that we exhibit this wisdom to ensure that we remain the wise old priests presenting the oﬀerings on the altars of Treasury, and that we do not become the sacriﬁce ourselves.
Be an eternal student
Keeping abreast with changes in tax legislation can be a daunting task; however staying updated is the cornerstone of any successful tax practice and will ensure that the practitioner has the necessary knowledge to provide up-to-date advice to clients. Stay informed by:
Visiting the SARS website regularly, to ﬁnd SARS interpretations of certain areas of legislation, administrative practices, deadlines, strategy changes and plans, risk areas, legislation changes, etc. SARS guides and interpretation notes should be downloaded and saved for easy access. Oﬅen, older guides or interpretation notes provide beneﬁcial information that does not reappear in later ones. The SARS website also contains useful links and templates, especially for small businesses.
Visiting websites of Professional bodies such as SAIT, SAICA, SAIPA provide regular information on changes in the Act, interpretation of the changes as well as judgments in tax cases.
Listening to and studying budget speeches and be speciﬁcally attentive to rate changes that may come into eﬀect immediately aﬅer the budget speech.
- Attending tax update seminars presented by professionals.
Ensuring your qualiﬁcations are up to date. Many universities present Higher Diploma in Tax courses, and some are even on-line. Basic technical diploma courses and short courses are also available on-line for persons with a less technical background on tax, such as lawyers.
Specialise or seek specialist advice
There are certain areas in tax that present a higher risk due to the complexity of the legislation. Ensure that you specialize in these areas if you give advice on these issues or alternatively seek specialist advice. For larger companies these may be areas such as transfer pricing, or complex capital gains tax implications, where superﬁcial compliance attempts will increase risk signiﬁcantly. Generally high-risk areas include typical anti-avoidance legislation.
Consider your conduct
Tax practitioners are expected to display professional conduct. Professional conduct includes, amongst many other things, meeting your responsibilities toward the taxpayer and the tax authority. This means that the tax practitioner should provide excellent service, by way of advice provided, treatment of client, and handling tax oﬃcials. It is imperative that the tax practitioner should fulﬁll the role as lynch pin between the taxpayer and tax oﬃcial by ﬁnding a balance between, maintaining a positive attitude toward SARS, and insisting on fair and professional treatment of the taxpayer by the revenue oﬃcials. Good, timely and professional communication skills will be an important factor in achieving these goals.
Limit your liability
In future the tax practitioner will have to be more vigilant in preventing claims against the tax practice by taxpayers related to errors, failure to advise and inappropriate tax treatment of income. Informal advice over the telephone should be eliminated, as the tax practitioner will not have evidence for his understanding of the facts, scope and the advice provided. To limit risk associated with future claims:
- ensure suﬃcient information is provided by the client, and request additional information if necessary;
- document conversations including date, client, advice required, responses to questions, issues not included in scope, ﬁling requirements and risks;
- engagement letters should be compiled and signed by both the taxpayer and tax practitioner, which delineate the speciﬁc scope, and clearly exclude additional issues. Avoid automatic renewal engagement letters that stay unchanged from year to year; and
- keep comprehensive records of all activities, information provided, ﬁlings done, payments made, advice provided.
The days are long gone where the tax practitioner can act as an accomplice in tax avoidance and evasion activities with absolutely no consequences, except for a huge bank account. Tax planning these days should have, as a priority; the avoiding of astronomical additional tax and penalties, and the only way to accomplish that is to increase compliance levels and manage tax audit risks. With the aggressive audits observed in South Africa currently, a good tax practitioner is one that can assist the taxpayer in successfully demonstrating compliance to the revenue oﬃcial and avoids abuse of the taxpayer by managing the tax auditor. To add risky avoidance structures to this mix will only increase the taxpayers’ risk exposure and create unrealistically low expectations for the taxes to be paid. As tax practitioners become more regulated, avoidance advice can present a great risk to the tax practitioner who might be held responsible later on.
Link to Linkedin
Discussion forums on professional networking sites, such as "Linked-In” provide a great opportunity for tax practitioners to share experience, ask questions, discuss contentious issues, and thereby increase their practical knowledge and become aware of issues that other practitioners have encountered and dealt with successfully. Become connected to your fellow tax practitioners by joining a tax discussion group.
Get acquainted with tax administration
Most tax practitioners with an accounting background are not speciﬁcally well versed in the administrative side of taxation. If this is the case, it means that your clients will not get the beneﬁt of solid tax administration advice or education on their constitutional rights and administrative obligations. With the recent rather aggressive Tax Administration Act that was promulgated, accountants can no longer ignore tax administration. Tax Practitioners must ensure that SARS oﬃcials follow due process and comply with the Tax Administration Act. Obtain Tax Administration knowledge by attending seminars on the Tax Administration Act or attending on-line courses on Tax Procedural Law (information available from SAIT).
Find a solid source
Any advice is only as good as the source from which it is gleaned. Many tax practitioners never consult the relevant Tax Act, but only rely on either previous knowledge obtained in seminars, or one speciﬁc textbook. Textbooks and seminar presenters only provide an interpretation of the actual legislation, which may vary from person-to-person. These interpretations are not always accurate. To ensure that the sources used for advice are solid, make sure to read the wording of the section in the relevant Tax Act; and make use of several sources (for instance more than one textbook) to provide you with an accurate and comprehensive picture of the legislation and its common interpretations.
Ensure that ﬁling errors are eliminated from the tax practitioner’s side by:
- double checking all ﬁling and extension due dates;
- instructing clients formally to give you notiﬁcation immediately if they receive SARS notices;
- using a diary system or tax administration soﬅware to trace tasks, ﬁling and dates;
- including all applicable deadlines in communication with clients; and
- ensuring good management of manual submissions and proof of submissions
Ensure that calculation errors are eliminated by:
- double checking all calculations and spreadsheet prepared by clients;
- comparing current and prior year income, deductions and other important information. Obtain explanations of diﬀerences from the taxpayer;
- utilizing built-in quality controls in tax soﬅware. Beware of program "bugs” in soﬅware programs including data import errors, calculation errors and out of date soﬅware (especially for employees tax);
- utilising professional staﬀ to do spot checks, but keep conﬁdentiality in mind;
- maintaining a healthy attitude of professional skepticism; and
- reconciling income tax, VAT, employees tax and customs information, if possible.
Don't risk your reputation
Tax Practitioners are currently high-risk taxpayers according to SARS. Ensure that you maintain an excellent reputation by maintaining a high level of perceived personal compliance and being a model taxpayer in order to avoid unnecessary audits.