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Tax Practitioner Compliance: A Christmas Carol

07 June 2012   (0 Comments)
Posted by: Stiaan Klue
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Charles Dickens refers to Ebenezer Scrooge, the main character in his 1843 novel, A Christmas Carol as "... a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner!"

I am sure no one wants to be classified in this manner, but if you read the recent comments by the Minister of Finance about the tax practitioner profession's poor tax compliance levels– one wonders if tax practitioners have "scrooge-like” tendencies!

Perhaps it is time that we revisit our past, present and future and reassess the role of tax practitioners and their statutory recognition. In 2004 an amendment to the Income Tax Act introduced a register of tax practitioners. However section 67A does not stipulate an industry wide code of conduct, does not require membership of a professional body, and has no enforcement mechanism.

Tax years past

Following the democratisation of South Africa in 1994, the performance of the greater treasury function has surpassed all expectations.  One of the reasons for the good performance and subsequent general prosperity of South Africa was the effectiveness and efficiency in the collection and administering of taxes.

However, South Africa comes from a past where several historical factors created a tax compliance culture that is less than it should be and is still even a concern today. These factors include:   


- Economic marginalization and consequent lack of knowledge about tax of a large segment of the population

The mind-set and practices that took hold when circumventing the imposition of international sanctions

- The historically limited capacity of the tax and customs administrations to challenge tax evasion and questionable, or even fanciful, tax planning structures and techniques.

Tax years present

The non-compliance culture of a section of the tax profession came to haunt them in the recent budget speech by the Minister of Finance. The Minister made sweeping comments about the profession's poor compliance levels.  He rightfully lashed out at tax practitioners who owe over R260 million in outstanding taxes and having more than 18 000 income tax returns outstanding in their personal capacity.

A significant impact on the tax industry post 1994 was the exodus of tax officials from the former Department of Revenue seeking opportunities in private practice as tax practitioners. Many tax officials received high quality functional training within Revenue, but lacked formal qualifications and affiliation with a professional body.

In their 5-year strategic plan for 2012 – 2016 SARS confirmed that tax practitioners who are not registered with a professional body have worse compliance levels in comparison to those that are members of a professional body. For example, the average debt per case for a non-registered tax practitioner is four times higher than for those who are registered. SARS believes that in order to minimise the compliance issues currently being experienced with tax practitioners generally, legislative amendments will be made to compel all practitioners registered with SARS to belong to a professional body.

Tax years yet to come

In the final vision offered to Scrooge he sees the consequences of his actions one year later. No one mourns his passing and all his money and possessions are lost. However Scrooge repents and receives a chance to correct past mistakes.

In the same vain the profession and SARS should reconsider the current path and find common solutions:


-  Tax practitioners should retake the moral high ground and become exemplary taxpayers

 - Tax practitioners should adopt an industry wide code of conduct to regulate their service offerings to tax payers

Professional bodies that represent tax practitioners should reclaim their indispensable and internationally recognised role as intermediaries between SARS and tax practitioners

SARS should embrace the tax practitioner profession as indispensable in ensuring tax compliance and educating unsophisticated taxpayers 

SARS should publicly commit to the development and support of the tax profession

This should lead to the establishment of a new co-regulatory model for the tax profession


The SAIT is committed to this process and was the first professional body, which as a condition of membership requires a tax clearance certificate to be submitted to the Institute as proof of compliance. 


WHY REGISTER WITH SAIT?

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.

MINIMUM REQUIREMENTS TO REGISTER

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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