Courts reel in SARS ‘fishing expeditions’ against taxpayers
21 May 2013
Posted by: Author: Evan Pickworth
Source: Evan Pickworth (BusinessDay live)
OPEN-ended fishing expeditions by the South African Revenue Service
(SARS) could come under attack as court actions begin to mushroom
against tax assessments in South Africa, a tax conference heard on
A concern is that small businesses could be left in the lurch due to the
high costs of advice and assistance where SARS gets it wrong.
Taxpayers were advised to carefully read audit letters issued to them to
ensure the requirement to "give adequate reasons" had been complied
with. A new format of return is being introduced by SARS this month,
called an enhanced income tax return for companies, which is aimed at
modernising company tax and improving efficiency.
SARS received powers in the new Tax Administration Act (TAA) to search
and seize without warrants in some instances, but the courts have
already moved to limit this right by balancing it against the right to
privacy and dignity contained in the Customs and Excise Act.
"The opportunity is there for you to revisit what they (SARS) have done
in an audit through the new letter-of-findings process in the TAA, how
they have done it, and to give you an opportunity to show them if they
are wrong, why they are wrong and that they have to take into account
all relevant facts and law," international tax attorney Prof Daniel
Erasmus said at the South African Institute of Tax Practitioners
conference held in Sandton on Wednesday.
Prof Erasmus said the new tax ombudsman, the SARS Service Monitoring
Office or appropriate tax litigation insurance could help small
businesses, but engagement between SARS and the industry to discuss
"frustrations" was necessary.
"There appears to be a strong emphasis on collecting money — whereas
taxpayers in the audience are expressing a breakdown in communication
and frustrations," Prof Erasmus said.
His advice was to "give what you absolutely have to after receiving
adequate reasons for an audit" and to engage with SARS auditors.
Prof Erasmus said Australia was taking action to improve relations
between the tax office and taxpayers, and South Africa should look to
the country as an example. "In Australia there will be meetings with big
business to find out what has gone wrong in the relationship. The tax
office is prepared to address this as the relationship is important for
"The trend is clearly for increased audits, with a big focus on
collections," KPMG corporate tax director Muhammad Saloojee said.
"New (tax) forms are probably to be welcomed as they should improve disclosure," KPMG associate director Lesley Isherwood said.