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Bids to tighten legal privilege in tax dealings

28 July 2015   (0 Comments)
Posted by: Author: Linda Ensor
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Author: Linda Ensor (BDlive) 

The Treasury and the South African Revenue Service (SARS) have proposed the introduction of a process to determine the validity of the legal privilege claimed by taxpayers to deny the tax authority access to documents.

Such a procedure only exists for search and seizure operations when a taxpayer refuses to hand over a document citing legal privilege.

SARS now wants to create a similar procedure for other circumstances such as information requests, interviews and field audits. This would overcome the delays that often arise because of wrangles over whether a claim of legal privilege is valid. This has had to be resolved by ad hoc arrangements or the courts.

The proposed new section in the draft Tax Administration Laws Amendment Bill — released last week by the Treasury for public comment with the draft Taxation Laws Amendment Bill — sets out requirements that must be met for legal privilege to be claimed and the procedure to be followed if SARS does not accept this.

The proposal will be closely scrutinised by legal and tax practitioners to determine whether it erodes the common law right of legal privilege between an attorney or advocate and a client, a respected principle.

In terms of the draft bill, a taxpayer claiming legal professional privilege in respect of material required by SARS would have to provide the tax authority with a description of the document, its author, the legal practitioner’s name, the capacity in which the practitioner was acting, the purpose of the advice and other details.

If SARS disputed the validity of the claim of privilege, a third party appointed under the Tax Administration Act would be given the material and make a ruling on whether the privilege applied or not. If there was still no agreement, the matter could be taken to the High Court.

South African Institute of Tax Practitioners CE Stiaan Klue said the tax board chair would have to rule within 21 days on whether legal privilege existed. He supported the proposal and understood the motivation, but said it could narrow taxpayers’ opportunity to claim privilege protection. The proposal would have to be closely examined to see whether taxpayers’ rights were infringed on.

"It appears that taxpayers frustrated SARS and abused the right to claim legal privilege," Mr Klue said.

ENS Africa tax executive Beric Croome said a framework for dealing with disputes over privilege outside of search and seizure procedures was preferable to the current ad hoc approach. But the Treasury and SARS had not addressed granting legal professional privilege to all registered tax practitioners, as in a number of overseas jurisdictions, he said.

KPMG head of dispute resolution Johan van der Walt said the measure set a hurdle for taxpayers wanting to justify a claim to legal privilege.

This article first appeared on


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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