SARS wants more powers to interview taxpayers and their employees without a court order
05 August 2015
Posted by: Authors: Nina Keyser and Carryn Alexander
Authors: Nina Keyser and Carryn Alexander (Webber Wentzel)
Section 47 of the Tax Administration Act 28 of 2011 (TAA) allows SARS, by notice, to require a person (whether or not chargeable to tax) to be interviewed by a SARS official in relation to his or her tax affairs, so as to clarify issues of concern to SARS on whether to render further verification or audit unnecessary and is not for purposes of a criminal investigation.
Currently, this provision does not allow SARS to require a third party to attend an interview in respect of the tax affairs of a taxpayer under investigation, and the purpose of this provision is to expedite and end the process of verification or audit, instead of being used in the on-going information-gathering process.
There is uncertainty about whether the current provision applies to juristic persons. In light of this, the Draft Taxation Laws Amendment Bill 2015 (DTLAB) proposes an amendment to section 47 that allows SARS to not only require the taxpayer whose tax affairs is under verification or audit to be interviewed, but also, where the taxpayer is a company or other legal entity, to require third parties such as current employees of the taxpayer or persons who hold an office in the taxpayer to be interviewed.
The proposed amendment also removes the current limitation concerning the purpose of the interview by providing that the interview must be intended to obtain relevant material to clarify issues of concern to SARS regarding the verification or audit. This has the effect of the interview forming part of the on-going information gathering process.
The TAA currently allows SARS to have witnesses subpoenaed and cross-examined under oath or solemn declaration, using the formal process of an inquiry provided in terms of Part C of Chapter 5 of the TAA.
The inquiry procedure is subject to certain requirements which safeguard taxpayers from over-zealous SARS officials. These requirements are that:
- SARS must obtain the permission of a judge;
- the scope of the inquiry must be limited;
- the inquiry must be in the presence of a presiding officer; and
- the right against self-incrimination must be observed.
According to the SARS Short Guide to the TAA (Short Guide), at paragraph 5.3.3, the purpose of section 47 "from the perspective of the person being interviewed," is "to possibly avoid more intrusive and potentially protracted verification and audit."
The implications of the proposed amendment to section 47 are that —
- incorrect or incriminating information may be gathered by SARS or incorrect or incriminating information may be disclosed by third parties (who do not have the necessary knowledge or skill) in relation to the tax affairs of the taxpayer without the consent of the taxpayer and without the protections that are available in relation to inquiry procedures. This is an intrusive mechanism for obtaining relevant material in that it is a violation of the taxpayer's constitutional right to privacy and may further be a violation of the right against self-incrimination;
- SARS will be able to effectively hold an inquiry without the above-mentioned safe-guards; and
- the verification and audit process may be protracted.
The above implications essentially nullify the initial purpose of section 47, as set out in the SARS Short Guide.
The taxpayer bears the onus of proving that an assessment is incorrect. It should be left to the taxpayer to present witnesses who have actual direct knowledge of the taxpayer's affairs. If the proposed amendment is promulgated, it will place an unfair burden on the taxpayer to prove the correctness or otherwise of unreliable and inadmissible "evidence" gathered by SARS in the interview process.
This article first appeared on webberwentzel.com.