How SA Taxpayer’s Rights Match up to OECD Standards
24 August 2016
Posted by: Author: Graham Crocker
Author: Graham Crocker (Bowman Gilfillan)
We investigate some
of the rights that South African taxpayers have in terms or the constitution
and legislation and how they match up to OECD standards.
Although your initial
reaction may be to hide when SARS comes knocking, a more sensible approach is
to know your rights and obligations as a taxpayer.
It is always in a
taxpayer’s interests to co-operate when faced with an enquiry from SARS. Taxpayers
should be aware of their rights and assert them when necessary. In terms of the
South African constitution and various acts, taxpayers already have certain
Some points to
consider in terms of South African taxpayers’ rights:
right to information in terms of the Constitution largely given effect to in
terms of the Promotion of Access to Information Act (PAIA);
right to just administrative action in terms of the Constitution, largely given
effect to in terms of the Promotion of Administrative Justice Act (PAJA);
right to privacy in terms of section 14 of the Constitution;
right not to incriminate oneself and to a fair trial in terms of section 35 of
the Constitution; and
provisions of the Tax Administration Act (TAA), including those empowering SARS
to effectively and efficiently collect tax.
rights outlined above are not absolute. The so called "limitation clause” in
the Constitution allows a law of general application (the TAA for example) to
limit a constitutional right if such limitation is reasonable and justifiable
in an open and democratic society based on human dignity, equality and freedom.
If these rights were not limited at all, SARS’ ability to collect tax would
have been greatly frustrated.
The right to be informed,
assisted and heard
The Organisation for
Economic Co-operation and Development (OECD) outlined taxpayer’s rights and
corresponding obligations in a practice note called "Taxpayer’s Rights and
Obligations”. Although the note was published in 2003, a number of the rights
and obligations discussed below remain relevant today.
The OECD’s practice note
states that taxpayers are entitled"to
have up-to-date information on the operation of the tax system and the way in
which their tax is assessed” and "to be informed of their rights, including
their rights of appeal.”
In South Africa this
right is promoted in the following ways:
to information is provided on SARS’ website. This includes Interpretation
Notes, Binding Rulings, and Guides. Guidance documents are not legally binding
but are aimed at keeping taxpayers informed, including a description of the
procedure in terms of which information can be requested from SARS under PAIA.
being able to query tax related matters by telephone (through SARS’ contact
centre) and in person at one of SARS’ branch offices.
- The creation
of the Office of the Tax Ombud to review and address any complaint regarding a
service, procedural or administrative matter arising from the administration of
a tax Act by SARS (section 15 of the TAA).
provides reports on the progress of an audit and, upon conclusion of an audit,
a document containing the outcome of the audit, including the grounds for any
proposed assessment (section 42 of the TAA).
This is consistent with the provisions of PAJA - a taxpayer is entitled
to request reasons about any administrative action taken by SARS. If no reasons
are provided, taxpayers are entitled to request such in terms of both PAJA and
has to request any relevant material from a taxpayer with reasonable
specificity (section 46 of the TAA). A non-specific request from SARS may
justifiably be met with a response from a taxpayer requesting SARS to be more
specific about the information requested. If SARS requests information which is
clearly irrelevant, a taxpayer should be entitled to tell SARS that they are
not entitled to the information.
- A taxpayer’s
right to object to an assessment (in accordance with the dispute resolution
provisions in the TAA and the Rules). Any dispute between SARS and a taxpayer
has to be heard by a competent independent court. Taxpayers may also exercise
their right to remain silent (section 35 of the Constitution).
right to certainty
"Taxpayers also have a right to a high degree of certainty as to the tax
consequences of their actions. Of course, certainty is not always possible. …
However, it is clearly a goal that taxpayers should be able to anticipate the
consequences of their ordinary personal and business affairs. Achieving this
goal is often difficult because modern tax systems are complex and evolving,”
according to the results on an OECD survey conducted in 1990. This is valid for South Africa; however it is
more of a goal to achieve rather than a realised right for both South African
taxpayers and SARS. While there is an advance tax ruling system in place
designed to promote "clarity, consistency and certainty regarding the
interpretation and application of a tax Act,” according to section 76 of the
TAA, recent amendments to the TAA and practices of SARS can frustrate
taxpayers’ right to certainty.
prescription periods should provide taxpayers with a degree of certainty about
their tax liability. However, the TAA was recently amended to give SARS a
unilateral discretion to extend original periods of prescription (usually three
years in respect of assessment by SARS and five years in respect of
self-assessments) arising from:
failure to provide "all relevant material requested”; or
an information entitlement dispute, including legal proceedings”.
Reliance on prescription
periods is based on the assumption that there was a full disclosure of material
facts to SARS, amongst other things. In practice SARS often alleges that a
taxpayer did not fully disclose all material facts and that the prescription
period does not apply for this reason. As mentioned earlier, such amendments
and practices by SARS can frustrate taxpayers’ right to certainty.
The right to privacy
"Taxpayers have the right to expect that the tax
authorities will not intrude unnecessarily upon their privacy… In all countries
very strict rules apply to the entry into a person’s dwelling or business
premises by a tax official in the course of a tax investigation and on
obtaining information from third parties,” according to the OECD document.
This is true in a
South African context – the TAA contains a number of provisions limiting SARS’
right to conduct inspections and audits on taxpayers’ premises. These include:
may only enter a dwelling-house or domestic premises, except any part thereof
used for trade, with the consent of the occupant (section 63(4)).
SARS is official is obliged to produce written authorisation when exercising a
power under the TAA. Failure to do so entitles taxpayers to assume that the
SARS official is not authorised (section 41).
SARS official may, without notice, arrive at a premise to carry out an
inspection if he has a reasonable belief that trade or enterprise is being
carried on. Such inspection is limited and can only determine:
identity of the person occupying the premises;
such person is registered for tax; and
such person is complying with the duty to keep records in the prescribed format
can only search premises and seize relevant material if a warrant has been
issued by a judge or a magistrate (section 59). The warrant should only be
issued in specific circumstances, including:
grounds or belief that there has been a material failure to comply with an
obligation imposed under a tax act or a tax offence has been committed; and
material is likely to be found on the premises evidencing the failure to comply
with a tax act or the tax offence (section 60).
may only search premises without a warrant if:
owner or person in control of the premises consents in writing to the search;
there are reasonable grounds for believing that:
removal or destruction of relevant material is likely;
warrant would be issued if it was applied for; and
delay caused in applying for a warrant would defeat the object of the search
searches conducted by SARS must be in accordance with prescribed guidelines
The right to confidentiality
taxpayers’ right is that the information available to the tax authorities on
the affairs of a taxpayer is confidential and will only be used for the
purposes specified in tax legislation,” according to the OECD. It suffices to say there is a general
prohibition on both SARS and taxpayers from disclosing confidential information
of the other.
Although this is by
no means an in depth analysis of all taxpayer’s rights, it is intended to
provide an overview of how taxpayers’ basic rights are protected in South
Africa. While such rights must be considered in the light of their
corresponding obligations, taxpayers should know their rights and ensure that
they are not unjustifiably infringed upon.
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This article first appeared on the July/August 2016 edition on Tax Talk.