01 April 2011
Posted by: Author: Mark Silberman
We now live in the so-called digital age and all or most paperwork is now in an electronic format.All information and paper can now be stored in a digital format which can be easily accessed from any terminal in the organisation subject to the organisation’s rules of access.This information can also be accessed from outside the organisation.
The new Companies Bill will be implemented on 1 April 2011 which will allow all company records to be in electronic format. With the advent of e-Filing, all taxpayers’ records are now in an electronic format.Does this mean that there is no more paper-based information, probably not? There will still be a great need to print out electronic information, but what this electronic information allows us to do is to move the information around the office or even to the clients and back quickly and efficiently.It also gives us the ability to access it from anywhere, anytime and anyplace.It is therefore important that professional firms build the right infrastructure to facilitate the ‘electronification’ of information which will reduce time and create efficiencies.
A major factor in this process is how we handle electronic or digital signatures, e.g. I would like to send my client an electronic form to sign.I would like the form signed electronically and sent back to me.The signature must be secure and stand up in a court of law.
What Is A Digital Signature
A digital signature is an electronic signature that can be used to authenticate the identity of the sender of a message or the signer of an electronic document, to ensure that the original content of the message or document that is sent is unchanged.Digital signatures are easily transportable, cannot be imitated by someone else, and can be automatically time-stamped.The digital signature must have the ability to ensure that the original signed message cannot easily be repudiated.
The Legal Situation In South Africa
The Electronic Communication and Transaction Act was promulgated in 2002 and caters for digital signatures.In this , provision is made for the legal recognition of electronic signatures.The Act does not prescribe what type of technology must be used.Examples of electronic signatures include an individual’s typed name at the end of an e-mail or a scanned image of a handwritten signature embedded into a Word document.The Act also creates special types of electronic signature known as an advanced electronic signature (AES) which is a particularly reliable form of signature which can be relied upon in signing various agreements and can be defended in a court action.Provision is also made for integrity being key to ensuring proper evidential weight of electronic evidence and the ability to notarise, acknowledge or certify electronic documents.
How would this work in practice?
You would send out electronic documentation when you attach your signature to a document.The signature means that the signer has signed the document, and is in agreement with the contents andcannot repudiate that he has signed.The document electronically signed can be accepted as the original and can be transmitted electronically to various other parties.There are various levels of authentication depending on the nature of the document.
Tax Returns Signings The Old Way:
In the good old days of manual tax returns, a return was signed by the client and sent in to SARS by the tax practitioner.It was an accepted fact that the manual signature passed all the risk of the tax return to the taxpayer unless there was collusion with the tax practitioner.Now in the electronic tax era on the SARS e-Filing website, the client signs a confirmation or facsimile of the return which most practices print out and file.There must also be a client mandate in place before the tax practitioner presses the submit button on the e-Filing website.This is in effect the signing of the tax return on behalf of the taxpayer.In this situation, the e-Filing rules make the manual risk the same as the electronic risk.
Tax Returns Signings The New Way:
Let’s say that the practitioner wants to do the whole tax return process electronically without printing out any paper work including the signing of the tax pack so that the tax return can be submitted.The following steps will be carried out.
1.Practitioners will finalise the tax return using a tax preparation desktop application
2.Practitioners will make sure the data is complete and produce a tax pack in Adobe PDF format, making provision for the client to sign by way of a digital signature.The digital signature can be generated automatically with Adobe Acrobat, as it is driven by a digital signature.
3.The tax pack PDF will be e-mailed to the client.
4.The taxpayer affixes their digital signature to the tax pack and returns to the tax practitioner.The practitioner can now submit the tax return to SARS feeling confident that the client agrees with the data and cannot repudiate anything on the tax return.
To use another example – all tax practices are going through the provisional tax process right now and require confirmation from taxpayers as to the estimated income and PAYE figures to be used in the processing of an IRP6.The digital signature would be ideal in obtaining confirmation with the appropriate documentation from the client.
This article deals with digital signatures at a basic level. If readers require more information on digital signatures, there is a ton of information available on the Internet. In this article, I have used Adobe Acrobat available from www.adobe.com in the USA as they have been in the digital signature business for years. With the rapid changing of laws and the rapid increase in pace of the way business is conducted and in order to remain competitive, tax practitioners need to adopt digital signatures.
Source: By Mark Silberman (TaxTALK)