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Malema tax saga will be a test for SARS

Wednesday, 10 October 2012   (0 Comments)
Posted by: SAIT Technical
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By Prof Matthew Lester (Tax Talk)

CALL back the past and the Hansie Cronje saga. Do you remember when a South African Revenue Service (SARS) official commented on his tax position?

Stephen Mulholland wrote that SARS just couldn't do that - a taxpayer has a right to privacy.

Times change. The taxpayer's right to privacy still stands, but today there are exceptions to the rule contained in the new Tax Administration Act.

So when a high-profile tax case comes into the public eye, does SARS have to observe an absolute right to privacy?

In my experience, SARS officials are disinclined to comment on tax disputes because it makes their job a nightmare.

It is far easier to complete an investigation quietly. We have yet to see a tax-evasion case in South Africa where SARS has gone out to make an example of a public figure as has happened overseas with celebrities such as Boris Becker and Sophia Loren.

But some taxpayers and their advisers reckon making an investigation high profile improves their prospects, so they run to the press. They argue that SARS is being unconstitutional, heavy handed while invading their privacy.

I would never advise this.

When a case goes high profile, SARS has to play by the rules of "no quarter asked or given” and the tax acts have to be applied to the letter of the law.

If there is ever scope to conclude a settlement agreement with SARS, that latitude is provided by way of the alternative dispute resolution agreement. And the prospects of that happening in a high-profile case are pretty remote.

The act also allows the commissioner or a designated official to rebut comments made by taxpayers in the press. But there are stringent limitations to this: the comments must be made only in rebuttal of an allegation made by the taxpayer and only to protect the reputation of SARS. The taxpayer must also be given 24 hours' notice that SARS intends making such a statement.

SARS may make disclosures to the National Prosecuting Authority, the high court, the Reserve Bank and other regulatory authorities. But again the act specifies a strict protocol.

It may be very interesting to see the act's provisions relating to privacy put to the test in months to come in the Julius Malema saga. But I doubt it will be SARS that casts the first stone.



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.

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