SARS Taking Money Out Of Bank Accounts : A Comparative Study With The US
10 September 2010
Posted by: Author: Daniel N Erasmus
SARS Taking Money Out Of Bank Accounts: A Comparative Study With The US
South Africa demonstrated without question that it can deliver beyond that which other First World nations can accomplish in the 2010 World Cup soccer event.The often flouted excuse that South Africa is an emerging country, and as such must be judged against those standards, will not ring true. Its finance and revenue departments are rated some of the best in the world.In addition, Pravin Gordhan has been very involved in the OECD and heads the Tax Administration Forum, leading and guiding many First World nations on how to improve tax collections.
The aforegoing introduction suggests that South Africa’s tax collection techniques should follow First World standards, there is no excuse for SARS not to.The US is a good example and one that South Africa should follow.Like South Africa, the US has a dedicated tax court system that works very well. Once the equivalent of our revised assessment has been issued, the equivalent of our objection must be submitted in time to ensure a hearing in the tax court.
The debt to the US Inland Revenue Service (IRS) remains due but not payable until the matter is heard in the tax court.Taxpayers can elect to pay the due tax and side step the tax court and take their IRS on review directly to the equivalent of our High Court, who may order the repayment of the tax paid.Notice of the choice of venue in which to sue the IRS must be given (there are reasons why taxpayers do this but that is outside the scope of this article).
Thereafter, the IRS debt is only payable in the tax court scenario once the matter is finalised.In South Africa, taxpayers have to motivate, through a special process, any request for the postponement of payment of the tax by demonstrating inter alia financial weakness and a strong case as well as providing security. And SARS still has discretion to say no.
In the US, if the taxpayer loses in the tax court (remember the tax is only payable now), the IRS must give 30-day notice of its intention to levy or lien the tax owing.So before they attach property or help themselves to money in bank accounts, they must give 30 days written notice to the taxpayer at its address in the IRS system.
Within these 30 days, the taxpayer may request that the matter be heard before an IRS independent appeals officer.This person has the duty to listen to both parties.The taxpayer may raise the fact that they never received the revised assessment, in which case the underlying merits may be revisited. If this is not the case, the taxpayer can propose alternate means to pay the taxes; suggest an offer to compromise; and explain financial difficulties where the payment of the tax will cause them severe financial hardship; all towards finding an equitable way to collect the tax, and in a manner that is justified and is not more encroaching than what is required under the circumstances.This last point is important as this is a principle contained in the South Africa Constitution as well. It is imperative that the least encroaching manner to enforce a requirement against a person is pursued – even in the situation where the taxpayer owes money to the State.The ultimate object does not change the principle.
The appeals officer then issues a finding, and if the taxpayer is dissatisfied with the outcome, he may petition the tax court within 30 days to hear the matter.All the time the IRS cannot simply take the money.For the skeptics who say that the money may be disappearing fast, there is a jeopardy process available to the IRS to execute quickly if it can be proven that the taxpayer is squandering assets to avoid paying taxes.This concept will be introduced into South Africa through the new Tax Administration Bill that will become law by the end of the year.
Once before the tax court, the taxpayer has the chance for the court to review the underlying merits of the case de novo if it can be successfully proven that the taxpayer did not receive the original revised assessment.Otherwise the tax court will review whether or not the IRS appeals officer has abused his discretion in arriving at the decision to collect the tax in the manner proposed by the IRS.Only then is the tax collected.
The above demonstrates a far more civilised way of doing things, as opposed to merely snatching money out of bank accounts.Everyone is given a fair opportunity to be heard on the issues, and only after a final decision by the tax court, the green light appears for the revenue service to take the money. It should be no different in South Africa.It must be remembered that the State is compelled to execute its rights against persons in the least encroaching manner.Removing funds out of a bank account without notification to the taxpayer, and a chance to challenge the State, is inherently unfair, and contra the rule of law, no matter what the State’s justification is – save for limited extreme situations where assets are being hastily dissipated in an attempt to avoid payment.
Source: By Daniel N Erasmus (TaxTALK)