Presentation on theme: "Adapted for the LSSA - Prof Daniel N Erasmus"— Presentation transcript:
1 Adapted for the LSSA - Prof Daniel N Erasmus Tax Administration Act 2011
2 More Info – www.IITF.net More notes & Advanced Diploma In Tax Procedural Law client fundingProf D N Erasmus –List of cases
3 BALANCE BETWEEN SARS’ POWERS & TAXPAYER RIGHTS TAA seeks to achieve a balance between powers & duties of SARS and rights & obligations of taxpayers thereby enhancing equity and fairness of tax administrationSARSTAXPAYERSPowers&DutiesRights&Obligations
4 DESIGN OF TAA: MAIN CHAPTERS - HIGHLIGHTS DESIGN OF TAB: MAIN CHAPTERSChapter 1DefinitionsChapter 11Recovery of TaxesChapter 2General AdministrationChapter 12InterestChapter 3RegistrationChapter 13RefundsChapter 4Returns and records ChapterChapter 14Write-off or Compromise of tax debtChapter 5Information GatheringChapter 15Non ComplianceChapter 6Confidentiality of informationChapter 16Understatement penaltyChapter 7Advance RulingsChapter 17Criminal OffenceChapter 8Assessment ChapterChapter 18Reporting of unprofessional conductChapter 9Dispute ResolutionChapter 19General ProvisionsChapter 10Tax Liability & PaymentChapter 20Transitional Provisions
6 TAA: BALANCE BETWEEN POWERS & RIGHTS (2) INFORMATION GATHERING & ENFORCEMENT (cont.)SARSTAXPAYER RIGHTSPOWERSAuditAudit selection on rational basis (random or risk)Only authorised SARS officials may audit & must produce authorisationAudit reports on stage of completion to taxpayerNotice of inconclusive audit to taxpayerLetter of audit findings to taxpayerTaxpayer may respond to findings prior to assessmentCriminalSeparation between audit and criminal investigationInvestigationsOnly authorised SARS officials may investigateCriminal investigation: Adherence to rights as suspectTaxpayer must be informed of inconclusive investigationOnly senior SARS official may lay complaint with NPAInquiryAuthorised by Judge of High Court upon applicationIndependent oversight of inquiryConfidential & protection against incriminating evidenceSearch &Warrant: Issued by Magistrate/Judge of High Court upon applicationseizureWarrantless: Narrow circumstancesCarrying out: Decency & Order; Inventory; Copies/originals;Protection of privileged documents; Application for return/damages
7 TAA: BALANCE BETWEEN POWERS & RIGHTS (3) RECOVERYSARS POWERSTAXPAYER RIGHTSRecoveryStatutory limitations (e.g. TAB; Insolvency Act; Companies Act)Period of limitations reduced to 15 yearsConstitutional limitations (PAJA, property rights etc.)SARS Administrative Complaint Resolution / Tax Ombud /Public Protector / Court reviewCivil procedural rights (e.g. Rescission of judgments)Debt reliefDeferment by instalment payment agreementsWrite off or compromise agreementsSuspension pending outcome of disputeRemittance of penalties and interestVoluntary Disclosure Programme - penalty reliefPersonal liabilityPrescribed criteria in TAB before 3rd party will be held liableNormal court remedies during recoveryRepatriation ofPrescribed judicial procedure before Judge of High Courtforeign assetsPreservation ofassets
9 Now for a more detailed look You will need a copy of the TAA in front of you to mark up with points I make SLIDES ADAPTED FROM THE SARS PRESENTATION TO THE SELECT COMMITTEE ON FINANCE
10 SARS’ MANDATESARS is the institution created to effect optimumrevenue collectionSARS’ objectives are the efficient and effective:Collection of revenue, andControl over the import, export, manufacture, movement,storage or use of certain goodsTo achieve its objectives SARS must secure the efficient and effective, and widest possible,enforcement of national Tax and Customs legislation
11 TAX LEGISLATIONTax legislation comprises two aspects:Tax liability provisionsTax administration provisionsTAA only deals with tax administrationModern framework is required for:Administration of the collection of revenueConsolidating duplicate & aligning disparaterequirements in existing law
12 WHY A TAX ADMINISTRATION ACT? Rationale for tax administrative review:Adapting to fast developing worldLowering Cost of Tax AdministrationTAB incorporates into one piece of legislation:Certain generic administrative provisionsCurrently duplicated in the different tax ActsSimplification of provisions > enhance clarity of law
13 REWRITE OF INCOME TAX ACT TAA is preliminary step to the re-write of the Income Tax Act & assists in re-write by dividing the work into more manageable parts – administrative part comprises about 25% of Act
14 MODERNISATION PLATFORM The TAA seeks to provide a foundation for further modernisation in the context of:Single RegistrationSelf AssessmentAccounting Transformation
15 MODERNISATION PLATFORM The TAA seeks to provide a foundation for further modernisation in the context of:Single registration Self Assessment Accounting transformation
16 INTENDED IMPACT OF TAA both taxpayers & SARS simplified form ● A simplified and harmonised TAB should benefitboth taxpayers & SARS● Compliance burden on taxpayers should reduce as:Taxpayers will have only one administration ActAct sets out all duties & rights with regard to all tax laws insimplified form● Administrative burden on SARS should reduce as:Unnecessary & duplicate provisions simplifiedInefficient or ineffective provisions removed10
17 INTERNATIONAL BEST PRACTICE IN TAX ADMINISTRATION In drafting the TAA, due regard was given to principlesof international best practice in tax administration (read with ss 195 of the Constitution & 4(2) of the SARS Act, placing s 237 Constitutional obligations on SARS):• Equity and fairness• Certainty and simplicity• Efficiency• EffectivenessThe impact of International Law – OECD Guidelines & eg. ‘foreseeably relevant’ information
18 TAX COMPLIANCE and places an unfair burden on them if not countered ● The TAA recognises:Majority of taxpayers who are compliant & want a moremodern & responsive revenue administration.Minority who seek to evade tax or defraud the government● Tax evasion undermines compliant taxpayers’ moraleand places an unfair burden on them if not countered● SARS must actively pursue tax evaders to maintainconfidence in integrity of tax system● Stricter enforcement powers therefore required totarget increasingly sophisticatedtax evaders11
20 CONSTITUTIONAL COMPLIANCE TAA designed with due regard to constitutional rights of taxpayers & constitutional obligations of SARSFor example, to ensure consistent treatment and greater equity & fairness, certain discretionary powers linked to objective criteria.Constitutionality of TAA reviewed by external constitutional expertsTAA does not seek to re-codify basic rights of taxpayers as they apply in any event, e.g. right to administrative justice
21 INTERNATIONAL BENCHMARKING ● Drafting of TAA was informed by international best practice● A comparative evaluation of tax administration laws of other countries● Countries evaluated have practical experience with tax administrative laws over long period● Countries evaluated: Australia, Botswana, Canada, New Zealand, UK, USABUT also consider OECD Guidelines
22 TAA PRE-INTRODUCTION CONSULTATION PROCESS SARS was assisted during drafting by:International tax experts from IMFLocal constitutional expertsInternal SARS stakeholders & National TreasuryClosed workshop with external tax experts May’09First draft for public comment: period 29 Oct’09 to 28 Feb’10 & external workshop on first draft in Mar’10Constitutional review by external constitutional experts & pre-certification by State Law AdvisersWorkshop with Economic Sectors Cluster in Aug’10Cabinet approval for introduction in Parliament 1 Sep’10Second draft for public comment Oct’10 to Dec’10 & external workshops Jan’11 & Feb’11Final certification Mar’11
23 CONSULTATION PROCESS: SIGNIFICANT CHANGES ● Significant changes following public comments:Introduction of Tax OmbudRemoval of advance notice of leaving South AfricaLimitation of information request to available recordsReasonable specificity limitation on information requestsProtection of legal professional privilege during seizureRight to claim damages arising from search & seizureReportable arrangement failure no longer an offenceEstimated assessments – burden of proof on SARSInterest ‘neutrality’ & remittance of interestSecurity for ‘audited’ refundPermanent VDP
24 TAA ISSUES General reception of TAA positive However, during the extended consultative processmainly the following have triggered debate:Tax OmbudAmbit of information gathering powersSearch and seizure without warrantNo legal professional privilege for tax practitioners whoare not lawyersSecrecy disclosure extensionCollection powers extension
25 DESIGN OF TAA - GENERAL APPROACH • The core provisions required for the administration ofthe tax system were identified and incorporated• A ‘step by step’ methodology followed to align thestructure of the TAB to the administrative ‘life cycle’ oftaxpayersOrganisation in functional categories will accentuate understandingTaxpayers & SARS will know which step applies to issue at hand• The legislative style followed is a new ‘simplified’manner of legislative writing, i.e. shorter sentences,shorter sections and less formalisticlanguage.
26 INTERPRETATION• InterpretationTerms used in the TAA which are defined in the tax Acts retain tax Act’s defined meaning in the TAA unless context indicates otherwise orspecifically defined in TAATerms defined in the TAA apply to tax Acts unless the context in the tax Act indicates otherwise, or if they are specifically defined in the relevanttax Act• Each tax Act will be amended to provide that:“Any administrative requirement and procedure for purposes of the performance of any duty, power or obligation or the exercise of any right in terms of a tax Act is, to the extent not regulated in this Act, regulated by the Tax Administration Act”• Inconsistency between TAA & tax Act > tax Act prevails• NB: Administrative provisions that are specific to a tax Act or the relevant tax type remainin that Act20
27 CHAPTER 1: DEFINITIONS• New defined concepts:Assessment > now includes self-assessment & excludes ‘decision’Biometric information > provides for less intrusive dataDate of assessment > now means date of issue of assessment and notdue date for paymentEffective date > determines date from which interest accruesOfficial publication > clarity on what constitutes SARS’ practice generallyprevailing i.e. applicable to whole of SARSRelevant material > means information forseeably relevant & determineswhat SARS may obtain by using its information gathering powersSelf-assessment > determination by taxpayer of tax payableSerious tax offence > relevant for referral of audit for separate criminalinvestigationTaxable event > means occurrence affecting liability for taxTax > defined for purposes of the administration of the TAA & includes penalties & interest
28 CHAPTER 2: GENERAL ADMINISTRATION (1) • Purpose of ActEffective and efficient collection of taxAlignment of the administration provisions of tax ActsConsolidation thereof into one piece of legislation• Administration of the ActSARS is responsible for the administration of the ActUnder the control or direction of the CommissionerIncludes administrative assistance to foreign governments under DTA i.e. information exchange, recovery and service of documents• Application of the Act > applies to every person liable to comply with a provision of a tax Act• Practice generally prevailing - sources:General rulingInterpretation notePractice notePublic notice issued by senior SARS official / C:SARS
29 CHAPTER 2: GENERAL ADMINISTRATION (2) • Limitation of administrative powersExercise of powers or obligations by SARS must be related to & within ambit of administration of tax ActsThree tier decision making levels (more serious powers reserved for C:SARS or delegated senior SARS officials)Conflict of interest provisions > prohibit involvement in matters with personal, family, financial etc. relationshipsIdentity Cards > All SARS officials who administer tax ActsWithdrawal or amendment of decisions > request driven & limited ifretrospectiveDelegations must be in writing with defined mandateAuthority to act in legal proceedings > only certain officials• Powers and duties of the MinisterMay be delegated except for power to issue regulations underTAA or appoint Tax Ombud
30 CHAPTER 2: TAX OMBUD: BACKGROUND The creation of an independent and effective recourse for taxpayers is in line with the objective of TAB to balance powers & rightsBackground to creation of Tax Ombud:Tax Ombudsman on lines of UK Adjudicator recommended by Katz CommissionJoint Standing Committee on Finance’s response was to suggest tax unit in Public ProtectorSARS Service Monitoring Office (SSMO) was intended as first step in improvementCreation of Tax Ombud was foreshadowed at launch of SSMO
31 CHAPTER 2: TAX OMBUD: ROLE Tax Ombud is a mechanism to address service failures & failures to respect taxpayer rightsTwo kinds of disputes with SARS:Disagreement on interpretation of law: normal dispute resolution steps i.e. Objection & Appeal> ADR> Tax Board> Tax Court> Normal Court systemDisagreement on administration of law: administrative issueresolution steps i.e. internal service issue resolution> SSMO>Tax Ombud > Public Protector/normal Court systemTaxpayer protection & remedies: specific in clausesdealing with SARS’ powers PLUS general e.g. requestto review decisions & Tax Ombud25
32 CHAPTER 2: TAX OMBUD: STRUCTURE & MANDATE Appointment: Minister of Finance & Ministerdetermines terms of officeStaffing: Seconded SARS staffFunding: SARS’ BudgetMandate: Review complaints regarding service,procedural or administrative mattersPowers: Review and mediatoryReporting: Directly to Minister of Finance
33 CHAPTER 3: REGISTRATION • Registration requirements regulated for all taxesPlatform for single registrationRegistration period of 21 business days across most taxesBiometric information may be required e.g. VAT registration > tocounteract identity & other fraud• Obligation to inform SARS of changes in registered particulars to ensure SARS has current informatione.g. Change in address (including physical, postal & electronic), bankingdetails & representative taxpayerCommissioner may prescribe additional information by notice• Taxpayer reference numberSARS may allocate in respect of one or more taxesUse of number compulsory in all correspondence to enable SARS to process taxpayer information more efficientlySARS may disregard correspondence without allocated reference number
34 CHAPTER 4: RETURNS AND RECORDS • Submission of returnObligation imposed by relevant tax ActIf imposed, form and manner of return regulated by TABTaxpayer may submit amended return before original assessment tocorrect errors• Third party returnsPrescribing types of information required from third parties in tax Act inflexible & voluminousInformation required & periods now required by public notice by C:SARS• Further or more detailed returns > may be required by SARS• Statement required regarding extent of examination reflected in accounts / financial statements submitted• Record retentionTAB general record requirement + record requirements in tax ActsManner of record keeping prescribedAudit or dispute: Records must be retained until concluded28
35 REGISTRATION & COMPLIANCE ISSUES Sections 22 to 39Biometric registrationRegistration number for all taxes registereds24(4) SARS may consider a return or other document submitted by a taxpayer to be invalid if it does not contain the reference number referred to in subsection (3)
36 REGISTRATION & COMPLIANCE ISSUES CONTINUED Filing various tax returns & keeping records – 5 years except always for periods no returns submitted – s29(3)Reportable arrangements – listed tax benefits
37 REGISTRATION & COMPLIANCE ISSUES CONTINUED Reportable arrangement penalty s 212 (1) A ‘participant’ who fails to disclose … a reportable arrangement … is liable to a ‘penalty’, for each month that the failure continues (up to 12 months), in the amount of—
38 REGISTRATION & COMPLIANCE ISSUES CONTINUED (a) R50 000, in the case of a ‘participant’ other than the ‘promoter’; or(b) R , in the case of the ‘promoter’. (2) The amount of ‘penalty’ determined under subsection (1) is doubled if the amount of anticipated ‘tax benefit’ for the ‘participant’ by reason of the arrangement (within the meaning of section 35) exceeds R , and is tripled if the benefit exceeds R
39 CHAPTER 5: INFORMATION GATHERING (1) • Information gathering powers are substantially supplemented / extended to address protracted ‘information entitlement’ disputes & waste of resources• Powers more aligned with international practice:Rationale for wide tax information gathering powers = to achieve equitable levying of taxes & discharge duties to correctly assess taxable income, revenue authority should have access to all information which might affect liability to tax“Information is the lifeblood of a revenue authority’s audit activities”Whole burden of taxation would fall only on honest taxpayers if revenue authority had no power to obtain information about taxpayers who may benegligent or non-compliant• Concerns about tax ‘fishing expeditions’ – see ‘foreseeably relevant’ and OECD meaning:Concept applies in criminal cases > ‘fishing’ to see if case exists, BUT tax audits can convertTax audits > impossible to audit all taxpayers thus random or risk based selection oftaxpayers for audit, BUT does random ever really exist?
40 CHAPTER 5: INFORMATION GATHERING (2) • New / extended powers:Inspections > To determine identity of the person occupying business premises & whether registered for taxRequests for information - ambit extended to:• Identifiable taxpayers (e.g. taxable event indicates existence of person liablefor tax but name unknown)• Classes of taxpayers (e.g. taxpayers involved in certain potential taxavoidance structures)• Information required for revenue estimation > SARS may request thisinformation but failure to submit does not constitute a criminal offence(specifically excluded in Chapter 17)Informal examination / interview at SARS office > aim = to clarifyissues of concern to render further audit unnecessarySearch & seizure without warrant > narrow exception to warrant requirement – should inter alia assist in tax fraud investigations
41 CHAPTER 5: AUDIT SELECTION (1) • Audit selection basis > now specified in TAA and may be onrandom (Constitutional?) or risk assessment basis• Random basis:Regarded as perfectly rational basis for audit in most countriesInevitably, there will be a random aspect to those who are selected“Often it will be impossible to determine from the face of the returnwhether any impropriety has occurred in its preparation. A spot check ora system of random monitoring may be the only way in which theintegrity of the tax system can be maintained.”[Supreme Court of Canada - R v McKinlay Transport 47 CRR 151 (SCC) at 168]In the USA, the IRS is known to have a program that randomly targets taxpayers for audit on a statistical basis – BUT a ‘statistical basis’ is still ‘a basis’ for selection, not entirely random
42 CHAPTER 5: AUDIT SELECTION (2) • Risk assessment audit selection basisInvolves assessing the risk profile of taxpayers (“risk assessment”) and then allocating resources in accordance with the risk profiles (“resourceto risk allocation”)Benefits of risk assessment:• More targeted audits and efficient use of SARS’ and taxpayers’ resources• SARS able to address emerging tax risks in real-time & provide tax certaintyto taxpayers sooner• Quicker guidance on tax matters• Reduces need for protracted audits (typically some years after targetedtransactions occurred)• Limit disputes• Reduces the incidence of tax underpayments, administrative penalties and interestObtaining real-time “relevant information” from taxpayers is key to effective risk management
43 CHAPTER 5: AUDIT V CRIMINAL INVESTIGATIONS (1) • If during an audit it appears that a person may have committed a serious tax offence then:-case must be referred to a SSO for a decision whether to conduct a criminal investigation;investigation proceeds with due adherence to rights of taxpayer as suspect; andfrom date of referral audit must keep audit and investigation material separately• Use of audit materialRelevant material obtained by audit -• before referral > may be used in an investigation• after referral > may not be used in criminal proceedings, BUT may be used to further criminal investigation• Use of information obtained via an investigationmay be used for audit or prosecutorial purposes
44 CHAPTER 5: AUDIT V CRIMINAL INVESTIGATIONS (2) SplitAuditAudit >prima facieseriousoffencesNo information flow ???Information flowCriminal Investigation
45 CHAPTER 5: SEARCH & SEIZURE WITHOUT WARRANT (1) • This power may only be invoked if a senior SARS official onreasonable grounds is satisfied that:There may be an imminent removal or destruction of relevant material likely to be found on the premises;If SARS applies for a search warrant, a search warrant will be issued; andThe delay in obtaining a warrant will defeat the object of the search and seizure.• Power is a very narrow exception to requirement that searches & seizures occur pursuant to warrant• Does not apply to private dwelling except for part used for tradeor if occupant consents• Courts have held that there are instances where warrantless search and seizure may be justified
46 CHAPTER 5: SEARCH & SEIZURE WITHOUT WARRANT (2) • This power is consistent with that found in more than 15 otherpieces of legislation in South Africa• SA organs of state / officials with similar powers: CompetitionTribunal; fire protection officers; forest officers; FSB;immigration officers; SAPS• OECD tax authorities with similar or greater powers:Tax authorities with warrantless search & seizure powers: Austria; Belgium; Chile; Czech Republic; Denmark; Greece; Hungary; Iceland; Ireland; New Zealand; Norway; Poland; Portugal; SloveniaTax authorities that may enter business premises & private dwellings without a warrant: Australia; Canada; Finland; Turkey
47 CHAPTER 5: Taxpayers’ new rights & obligations • SARS official must demonstrate authority to conduct audit• Prior notice of field audit at least 10 business days before audit• Taxpayers obliged to give SARS reasonable assistance duringfield audits & search and seizure• Report on the progress of on going audit• Notification of conclusion of audit that revealed no adjustments• Taxpayer entitled to audit findings letter & respond in writingbefore assessment if audit revealed material adjustments• Search & seizure:• In conduct of search SARS must have strict regard to decency and order• Taxpayer entitled to inventory of seized material• SARS may remove copies and not originals where possible• Taxpayer may claim for unjustified physical damage caused during search• Protection of material if legal professional privilege asserted
48 CHAPTER 5: LEGAL PROFESSIONAL PRIVILEGE (LPP) • LPP is a legal principle that certain information shared betweenclient and lawyer may not be disclosed without client’s consent• TAA recognises LPP but does not extend it to non-lawyers• Inherent differences between professions, including lawyers’oversight by and duty to Courts• Internationally:• Australia regulates tax practitioners but does not extend privilege to non-lawyers(currently under discussion)• Canada does not regulate tax practitioners or extend privilege to non-lawyers• New Zealand does not regulate tax practitioners but extends limited privilege tonon-lawyers• UK does not regulate tax practitioners and Court of Appeal confirmed in thePrudential case that privilege is not extended to non-lawyers stating; “Parliament'sfailure to change the law in this respect is not an accident” (case is on appeal)• USA regulates tax practitioners and extends limited privilegeto non-lawyers, BUT see Kovell case extended to third parties under attorney
49 CHAPTER 6: CONFIDENTIALITY (1) • Rationale for tax secrecy:Constitutional rationale: protects taxpayer’s right to privacyTax policy rationale: to encourage taxpayers to make full & voluntary disclosure of all relevant information for purposes of assessing tax liability• In TAA secrecy & confidentiality provisions are:Aligned across taxesMore explicit as to who is subject theretoExtended to include SARS confidential information
50 CHAPTER 6: CONFIDENTIALITY (2) • General prohibition of disclosure:Secrecy specifically applicable to C:SARS & former or current SARS employee or person contracted by SARSSARS employees and persons contracted by SARS obliged to take oath of secrecy before commencing dutiesInformation unlawfully disclosed may not be further disclosed or published, including by the mediaC:SARS may personally disclose information to counter / rebut false allegations in media in very narrow circumstances• SARS confidential informationIncludes, for example, confidential information such as internal policies, privileged legal opinions, informant information & information that could prejudice the economic interests or financial welfare of the RepublicDisclosure regulated > only permitted if public information, authorised by C:SARS, access has been granted under PAIA or by order of a High CourtUnauthorised disclosure criminalised
51 CHAPTER 6: CONFIDENTIALITY (3) • The current secrecy and disclosure proposals seek tobalance the rationale for tax secrecy with information needsof government to meet law enforcement & integrity provisions• Disclosure justified where the public benefit/interestoutweighs concerns about individuals’ right to privacy• Disclosure of information subject to secrecy:In the course of performance of duties under a tax ActBy High Court & criteria to consider prescribedAspects where disclosure is clarified or widened:• Information needed to enable third party to provide information to SARS• Verification of basic non-financial information• Financial regulatory agencies
52 Sections 234 to 238 criminal matters Serious tax offence AUDITSSections 40 to 74Sections 234 to 238 criminal mattersSerious tax offence
53 AUDITS CONTINUEDs40 SARS may select a person for inspection, verification or audit on the basis of any consideration relevant for the proper administration of a tax Act, including on a random or a risk assessment basiss41(3) If the official does not produce the authorisation as required under subsection (2), a member of the public is entitled to assume that the person is not a SARS official so authoriseds42 (1) A SARS official involved in or responsible for an audit under this Part must, in the form and in the manner as may be prescribed by the Commissioner by public notice, provide the taxpayer with a report indicating the stage of completion of the audit
54 AUDITS CONTINUEDS42(2) Upon conclusion of the audit…provide the taxpayer with a document containing the outcome of the audit, including the grounds for the proposed assessment or decision referred to in section 104(2); (3) Upon receipt of the document described in subsection (2)(b), the taxpayer must within 21 business days of delivery of the document, or the further period requested by the taxpayer that may be allowed by SARS based on the complexities of the audit, 15 respond in writing to the facts and conclusions set out in the document; (4) The taxpayer may waive the right to receive the document – DON’T!
55 AUDITS CONTINUEDs43(2) Any relevant material gathered during an audit after the referral, must be kept separate from the criminal investigation and may not be used in any criminal proceedings instituted in respect of the offences44 (1) During a criminal investigation, SARS must apply the information gathering powers in terms of this Chapter with due recognition of the taxpayer’s constitutional rights as a suspect in a criminal investigation
56 AUDITS CONTINUEDProduction of “relevant material”- s46(1) SARS may, for the purposes of the administration of a tax Act in relation to a taxpayer, whether identified by name or otherwise objectively identifiable, require the taxpayer or another person to, within a reasonable period, submit relevant material (whether orally or in writing) that SARS requires – expand on ss 46 to 49“Relevant material” - means any information, document or thing that is forseeably relevant for tax risk assessment, assessing tax, collecting tax, showing non-compliance with an obligation under a tax Act or showing that a tax offence was committed;
57 AUDITS CONTINUEDs49(2) No person may without just cause— (a)obstruct a SARS official from carrying out the audit or investigation; or (b)refuse to give the access or assistance as may be required under subsection (1).s50(1) Conduct an inquiry for the purposes of the administration of a tax Acts50(2) A judge may, on application made ex parte by the Commissioner or a senior SARS official grant an order in terms of which a person described in section 51(3) is designated to act as presiding officer at the inquiry contemplated in this section – NB conflict example!
58 AUDITS CONTINUEDs51 reasonable grounds to believe that— (a) a person has - (i) failed to comply with an obligation imposed under a tax Act; or(ii) committed a tax offence; and (b) relevant material is likely to be revealed during the inquiry which may provide proof of the failure to comply or of the commission of the offence – Ferreira v Levin BCLR ! (CC) & R v Jarvis  3 S.C.R. 757, 2002 SCC 73 ?s57(2) Incriminating evidence obtained under this section is not admissible in criminal proceedings against the person giving the evidence, unless the proceedings relate to—(a) the administering or taking of an oath or the administering or making of a solemn declaration; (b) the giving of false evidence or the making of a false statement; or (c) the failure to answer questions lawfully put to the person, fully and satisfactorilySimilar provisions for search & seizure warrants
59 AUDITS CONTINUEDBreaching secrecy – s67(5) The Commissioner may, for purposes of protecting the integrity and reputation of SARS as an organisation and after giving the taxpayer at least 24 hours’ notice, disclose taxpayer information to the extent necessary to counter or rebut false allegations or information disclosed by the taxpayer, the taxpayer’s duly authorised representative or other person acting under the instructions of the taxpayer and published in the media or in any other mannerHowever – s68(1)(e) information related to the operations of SARS, including an opinion, advice, report, recommendation or an account of a consultation, discussion or deliberation that has occurred, if— (i) the information was given, obtained or prepared by or for SARS for the purpose of assisting to formulate a policy or take a decision in the exercise of a power or performance of a duty conferred or imposed by law
60 AUDITS CONTINUEDSelf-incrimination s 72 An admission by the taxpayer of the commission of an offence under a tax Act— (a) contained in a return, application, or other document submitted to SARS by a taxpayer; or (b) obtained from a taxpayer under Chapter 5, is XXX admissible in criminal proceedings against the taxpayer, unless a competent court directs otherwiseTHERE IS A MISTAKE YOUR PRINTED NOTES
61 CHAPTER 7: ADVANCE RULINGS • The advance ruling system currently regulated in the IncomeTax Act and the VAT Act now incorporated in the TAB• TAB provisions establish framework for the system and set outbasic rules regarding:Application process & feesExclusions and refusalsEffect of rulingsImpact of subsequent law changesRetrospectivityPublication of rulings• Provisions also provide for specific rules in respect of:Binding general rulingsBinding private rulingsBinding class rulings
62 CHAPTER 8: ASSESSMENT• New provisions:Original assessment: Defined term that includes 1st assessment by SARS & return which incorporates the taxpayer’s determination of the amount of a tax liabilityAdditional assessment: New simplified grounds on which additional assessments may be issued to achieve alignment across taxesReduced assessment: Clarity that reduced assessment will also be issued if taxpayer made undisputed errors in returnJeopardy assessment: May be issued before end of tax period to secure early collection of tax at risk e.g. in case of dissipationEstimation of assessment: Concept of ‘estimated assessment’ replaced with provision that original, additional, reduced or jeopardy assessment may be ‘based on an estimation’Notice of assessment: If contrary to return must include groundsPeriod of limitations for issuance of assessment: Normal assessment 3 years & self-assessment 5 yearsFinality of assessment: Consolidated
63 CHAPTER 9: DISPUTE RESOLUTION • New provisions:Burden of proof: Aligned & SARS bears burden in case of assessment based on jeopardy and estimation & additional tax re: understatementDecision on objection: If disallowed must include groundsDecision of Tax Board: Time period within which decision must be given prescribed – 60 business daysConflict of interest: Chairperson of Tax Board / Member of Tax Court must withdraw in case of conflict that may give rise to biasSittings of Tax Court: Generally not public, but Court has a discretion to order sitting to be public on application by any person & if exceptional circumstances existOrder for costs in favour of SARS : Constitutes funds of SARSPublication of Tax Court judgments: All must be published to ensure not only SARS has benefit of unreported judgmentsSettlement of dispute: Only possible if dispute arises after issue of assessmentNew Test Case provision
64 Section 12 right of appearance Sections 101 to 150 DISPUTESSection 12 right of appearanceSections 101 to 150
65 DISPUTES CONTINUEDBurden of proof s 102 (1) A taxpayer bears the burden of proving— (a) that an amount, transaction, event or item is exempt or otherwise not taxable; (b) that an amount or item is deductible or may be set-off; (c) the rate of tax applicable to a transaction, event, item or class of taxpayer; (d) that an amount qualifies as a reduction of tax payable; (e) that a valuation is correct; or (f) whether a ‘decision’ that is subject to objection and appeal under a tax Act, is incorrect. (2) The burden of proving whether an estimate under section 95 is reasonable or the facts on which SARS based the imposition of an understatement penalty under Chapter 16, is upon SARS.
66 DISPUTES CONTINUEDForum for dispute of assessment or decision s 105 A taxpayer may not dispute an assessment or ‘decision’ as described in section 104 in any court or other proceedings, except in proceedings under this Chapter or by application to the High Court for review.Usual objection & appeal balanced against High court proceedings on procedural issuesSettlement of disputes s In this Part, unless the context indicates otherwise, the following terms, if in single quotation marks, have the following meanings:
67 DISPUTES CONTINUED‘dispute’ means a disagreement on the interpretation of either the relevant facts involved or the law applicable thereto, or of both the facts and the law, which arises pursuant to the issue of an assessment or the making of a ‘decision’; and ‘settle’ means, after the lodging of an appeal under this Chapter, to resolve a ‘dispute’ by compromising a disputed liability, otherwise than by way of either SARS or the person concerned accepting the other party’s interpretation of the facts or the law applicable to those facts or of both the facts and the law, and ‘settlement’ must be construed accordingly.
68 DISPUTES CONTINUEDPurpose of part s (1) A basic principle in tax law is that it is the duty of SARS to assess and collect tax according to the laws enacted by Parliament and not to forgo a tax which is properly chargeable and payable. (2) Circumstances may require that the strictness and rigidity of this basic principle be tempered, if such flexibility is to the best advantage of the State. (3) The purpose of this Part is to prescribe the circumstances in which it is appropriate for SARS to temper the basic principle and ‘settle’ a ‘dispute’ – Glenister v RSA CCT 48/10 
69 CHAPTER 10: TAX LIABILITY & PAYMENT (1) • New provisions:Categories of persons liable to tax: To simplify & clarify which persons are liable to tax and in which capacity. Taxpayers:• Persons (primary) chargeable to tax• Representative taxpayers• Withholding agents• Responsible third parties• Person who is the subject of a request to provide assistance under DTASecurity:• SARS may require security to safeguard collection of tax e.g. in case ofwithholding agent who repeatedly failed to withhold / pay tax due• Security may also be required from any or all of members, shareholders ortrustees who controls / manage the taxpayerPreservation of assets order:• Common law remedy codified in TAA for tax administrative purposes• Order by High Court & SARS may seize assets in anticipation of order• Power available as conservancy measure for purposes ofmutual assistance in the recovery of tax on behalf of foreign governments
70 CHAPTER 10: TAX LIABILITY & PAYMENT (2) • New provisions:Pay now argue later: Rule that dispute (objection & appeal) does not automatically suspend obligation to pay clarified in Taxation Laws Second Amendment Act, 18 of TAA additionally provides that:• Collection steps by SARS are prohibited during consideration of suspensionrequest and 10 days after revocation notice, except in narrow circumstances• Leave of Court is required for institution of sequestration or liquidation if disputedtax is not paid and did not get a suspension of payment obligationTaxpayer account & allocation of payment: TAA creates• Framework for single taxpayer account with rolling balance• Framework for “first in first out” payment allocation rule i.e. payment may beapplied to oldest debt first despite taxpayer designationInstalment payment agreement: Administrative debt relief mechanism now included in law
72 TAX LIABILITY & PAYMENT Liability of representative taxpayer s154(1) A representative taxpayer is, as regards— (a) the income to which the representative taxpayer is entitled;(b) moneys to which the representative taxpayer is entitled or has the management or control; (c) transactions concluded by the representative taxpayer; and (d) anything else done by the representative taxpayer, in such capacity - (i) subject to the duties, responsibilities and liabilities of the taxpayer represented; (ii) entitled to any abatement, deduction, exemption, right to set off a loss, and other items that could be claimed by the person represented; and (iii) liable for the amount of tax specified by a tax Act. (2) A representative taxpayer may be assessed in respect of any tax under sub- section (1), but such assessment is regarded as made upon the representative taxpayer in such capacity only.
73 TAX LIABILITY & PAYMENT CONTINUED Personal liability of representative taxpayer s155 A representative taxpayer is personally liable for tax payable in the representative taxpayer’s representative capacity, if, while it remains unpaid— (a) the representative taxpayer alienates, charges or disposes of amounts in respect of which the tax is chargeable; or (b) the representative taxpayer disposes of or parts with funds or moneys, which are in the representative taxpayer’s possession or come to the representative taxpayer after the tax is payable, if the tax could legally have been paid from or out of the funds or moneys.
74 TAX LIABILITY & PAYMENT CONTINUED Payment of tax pending objection or appeal s164 (1) Unless a senior SARS official otherwise directs in terms of subsection (3)— (a) the obligation to pay tax chargeable under a tax Act; and (b) the right of SARS to receive and recover tax chargeable under a tax Act, will not be suspended by an objection or appeal or pending the decision of a court of law pursuant to an appeal under section 133. (2) A taxpayer may request a senior SARS official to suspend the payment of any tax or a portion thereof due under an assessment if the taxpayer intends to dispute or disputes the liability to pay that tax under Chapter 9. (3) A senior SARS official may suspend payment of the disputed tax having regard to—
75 TAX LIABILITY & PAYMENT CONTINUED the compliance history of the taxpayer;the amount of tax involved; the risk of dissipation of assets by the taxpayer concerned during the period of suspension;whether the taxpayer is able to provide adequate security for the payment of the amount involved;whether payment of the amount involved would result in irreparable financial hardship to the taxpayer;whether sequestration or liquidation proceedings are imminent; whether fraud is involved in the origin of the dispute; orwhether the taxpayer has failed to furnish any information requested under this Act for purposes of a decision under this section.
76 TAX LIABILITY & PAYMENT CONTINUED (4) If the payment of tax which the taxpayer intended to dispute was suspended under subsection (3) and subsequently—no objection is lodged;an objection is disallowed and no appeal is lodged; oran appeal to the Tax Board or Court is unsuccessful and no further appeal is noted,the suspension is revoked with immediate effect from the date of the expiry of the relevant prescribed time period or any extension of the relevant time period under this Act.
77 TAX LIABILITY & PAYMENT CONTINUED (5) A senior SARS official may deny a request in terms of subsection (2) or revoke a decision to suspend payment in terms of that subsection with immediate effect if satisfied that—(a) after the lodging of the objection or appeal, the objection or appeal is frivolous or vexatious; (b) the taxpayer is employing dilatory tactics in conducting the objection or appeal; (c) on further consideration of the factors contemplated in subsection (3), the suspension should not have been given; or (d) there is a material change in any of the factors described in subsection (3), upon which the decision to suspend the amount involved was based. (6) During the period commencing on the day that— (a) SARS receives a request for suspension under subsection (2); or (b)a suspension is revoked under subsection (5), and ending 10 business days after notice of SARS’ decision or revocation has been issued to the taxpayer, no recovery proceedings may be taken unless SARS has a reasonable belief that there is a risk of dissipation of assets by the person concerned. (7) If an assessment or a decision referred to in section 104(2) is altered in accordance with—
78 TAX LIABILITY & PAYMENT CONTINUED an objection or appeal; a decision of a court of law pursuant to an appeal under section 133; ora decision by SARS to concede the appeal to the tax board or the tax court or other court of law,a due adjustment must be made, amounts paid in excess refunded with interest at the prescribed rate, the interest being calculated from the date that excess was received by SARS to the date the refunded tax is paid, and amounts short-paid are recoverable with interest calculated as provided in section 187(1).(8) The provisions of section 191 apply with the necessary changes in respect of any amount refundable and any interest payable by SARS under this section.
79 CHAPTER 11: RECOVERY OF TAX • SARS’ collection powers have been strengthened:In respect of repatriation of offshore assets to satisfy tax debtsIn respect of personal liability of third parties who:• Assist in dissipation of assets• Receive property from tax debtor for below fair market value• Benefit from ‘asset stripping’ of tax debtor e.g. shareholders• Part with / dispose of the assets or money of a tax debtor contrary to a notice bySARS to transfer the assets or money to SARS• Period of limitation on collection of outstanding tax debtsCurrent 30 year prescription period for tax reduced to 15 yearsBenefits SARS: more practical approach to debt managementBenefits taxpayer: Finality achieved within more reasonable period• Appointment of third party to satisfy tax debtsPerson required to transfer money held, including pension or remuneration,owed to tax debtorSARS may revise notice to enable taxpayer to pay basic living expenses including those of dependants
80 RECOVERY OF TAXLiability of shareholders for tax debts s181 (1) This section applies where a company is wound up other than by means of an involuntary liquidation without having satisfied its tax debt, including its liability as a responsible third party, withholding agent, or a representative taxpayer, employer or vendor.(2) The persons who are shareholders of the company within one year prior to its winding up are jointly and severally liable to pay the unpaid tax to the extent that—
81 RECOVERY OF TAX CONTINUED (a) they receive assets of the company in their capacity as shareholders within one year prior to its winding-up; and(b) the tax debt existed at the time of the receipt of the assets or would have existed had the company complied with its obligations under a tax Act.(3) The liability of the shareholders is secondary to the liability of the company.(4) Persons who are liable for tax of a company under this section may avail themselves of any rights against SARS as would have been available to the company.
82 RECOVERY OF TAX CONTINUED (5) This section does not apply— (a) in respect of a ‘‘listed company’’ within the meaning of the Income Tax Act;or (b) in respect of a shareholder of a company referred to in paragraph (a).
83 CHAPTER 12: INTEREST• TAA creates framework for:Alignment of interest provisions across taxesCompounded interest• General rule:Interest accrues from ‘effective date’, i.e. normally the date that tax is payable under a tax Act, to date of paymentInterest rate is the ‘prescribed interest rate’ except in respect of overpayments of provisional tax (4% points below)Remittance of interest discretion retained - limited to specified circumstances beyond the taxpayer’s control• Refund interest payable by SARS:Interest calculated from the later of the ‘effective date’ or date that theexcess payment received by SARSTaxpayer thus normally entitled to refund interest from same date that SARS would have been entitled to interest on unpaid taxSome exceptions in tax Act e.g. VAT Act where interest on refund only payable after 21 days of claim
84 INTEREST187. (1) If a tax debt or refund payable by SARS is not paid in full by the effective date, interest accrues on the amount of the outstanding balance of the tax debt or refund—(a) at the rate provided under section 189; and(b) for the period provided under section 188.(4) The effective date in relation to an additional assessment or reduced assessment is the effective date in relation to the tax payable under the original assessment.(5) If a senior SARS official is satisfied that interest payable by a taxpayer under subsection (1) is payable as a result of circumstances beyond the taxpayer’s control, the official may, unless prohibited by a tax Act, direct that so much of the interest as is attributable to the circumstances is not payable by the taxpayer.
85 CHAPTER 13: REFUNDS• New provisions:Refund paid into a wrong account by SARS may be collected as if it is tax> otherwise SARS only able to recover amount through protracted common law remedies such as enrichmentA refund need not be authorised by SARS until such time that a verification, inspection or audit of the refund has been finalised• SARS issues assessments on expedited basis, so issue of assessment reflectingrefund amount does not mean payment is authorised• Most taxpayers will get refunds shortly after assessment but some may beselected for audit• Refund need not be paid during audit but must be paid if security is given• Taxpayer will remain entitled to interest from the later of ‘effective date’ / date thatthe overpayment was made, to date of payment of the refund by SARS• Set-off of refunds against existing tax debts prohibited in the case ofinstalment payment agreements & suspended disputed tax• Limitation of payment of refunds if taxpayer has outstandingreturns limited to income tax & VAT
86 REFUNDSs190(2) SARS need not authorise a refund as referred to in subsection (1) until such time that a verification, inspection or audit of the refund in accordance with Chapter 5 has been finalised.(3) SARS must authorise the payment of a refund before the finalisation of the verification, inspection or audit referred to in subsection (2) if security in a form acceptable to a senior SARS official is provided by the taxpayer.(4) A person is entitled to a refund under subsection (1)(b) only if the refund is 15 claimed by the person within three years, in the case of an assessment by SARS, or five years, in the case of self-assessment, from the date of the assessment.
87 CHAPTER 14: WRITE OFF / WAIVER OF TAX DEBTS • Provisions are essentially:A form of tax debt reliefMay be afforded to taxpayers under certain prescribed circumstances• No major changes were made to current law, except:Circumstances where it is appropriate to compromise a tax debt were made less restrictiveSome of the factors that disqualify the tax debtor from a compromise agreement removed from current law include:• Compromise based solely on a claim of hardship in paying the tax debt,including the need to sell a home or business• Compromise to assist a debtor who has become overcommitted• Compromise to save a business from failure or closure• Compromise to alleviate harsh or unfair operation of a tax law in particularcircumstances
88 CHAPTER 15: PENALTIES• The administrative penalties imposed under the Income Tax Actnow included in TAA & apply across taxes• These penalties target non-compliance with administrativeobligation under a tax Act• New provisions:Imposition of penalty mandatory (currently discretionary) > per international models as certainty of penalty enhances complianceTargeted non-compliance will be listed in public notice by C:SARS > in order to only target impactful / more serious non-compliancePercentage based penalties imposed in TAB but % of penalty (e.g. 10%)determined by relevant tax ActAdministrative penalty for failure to report a reportable arrangement > included in this Chapter & imposed on a more proportionate basis
89 CHAPTER 16: UNDERSTATEMENT PENALTY • The current open-ended discretion to impose additional tax(understatement penalty under TAA) up to 200% now limited bynew structure whereby percentage of additional tax will bedetermined by :Taxpayer’s behaviour (e.g. gross negligence), andOther objective criteria (e.g. voluntary disclosure) in a Table• New provisions:Imposition triggered by an ‘understatement’ (defined term)If understatement is ‘substantial’ (defined) behaviour irrelevantMethodology for calculation of tax shortfall prescribedOnus to prove grounds for alleged behaviour on SARSAdministrative & understatement penalty ‘double jeopardy’ avoidedPermanent ‘Voluntary Disclosure Programme’ > administrative penalty, understatement penalty & criminal charges relief but not interest
90 CHAPTER 17: CRIMINAL OFFENCES (1) • General statutory offences now included in TAA but tax typespecific offences may remain in the other tax Acts, and include:Non-compliance offencesTax evasionContravention of secrecy provisionsFiling returns without authority• New provisions:Tax evasion “reverse onus”:• Reverse onus on taxpayer under current law has been removed• Replaced with ‘evidentiary burden’ i.e. taxpayer needs to prove that there is areasonable possibility that he / she was ignorant of the falsity of fraudulent statement & ignorance was not due to negligenceDecision to lay a complaint of statutory tax evasion: May only be taken by a senior SARS official
91 CHAPTER 18: UNPROFESSIONAL CONDUCT • No major changes to current law except one additionalrequirement to be registered as a tax practitioner• A person may not be registered as a tax practitioner if duringthe five years before his or her application for registration he or she has:Been removed from a related profession or professional body for dishonesty, orBeen convicted of:• theft, fraud, forgery or uttering a forged document, perjury or statutoryoffence of corrupt activities, or• any other crime involving dishonestywith a sentence of two years’ imprisonment or equivalent fine
92 CHAPTER 19: GENERAL PROVISIONS • Provisions are predominantly based on current law, andprovides for:Deadlines for payments, submission and other actionPower of Commissioner to determine date for submission of returns and payment of tax, interest and penaltiesAppointment of public officers & default in appointmentAddress, authentication and delivery of documentsElectronic communication rules (to be issued in regulations)New provision which caters for non-material defects in procedural requirements for the issue of documents > defects do not affect the validity of procedure provided taxpayer has effective knowledge of the notice / and of its content• The procedures and the requirements for the issue of a taxclearance certificate are now regulated in the TAAunder this Chapter
93 CHAPTER 20: TRANSITIONAL PROVISIONS • Provisions aimed at ensuring a smooth transition fromcurrent law to the Tax Administration Act, uponcommencement• Essential rule followed:Deleted provisions only apply until TAA commencement dateThereafter TAA applies (i.e. including ongoing audits, investigations, disputes & debt recovery) – idea is to avoid ‘two systems’ going forwardException: Criminal Prosecutions
94 SCHEDULE 1 TO TAA (1)• Most administrative provisions removed from the various taxActs and now housed in the TAA• Provisions that are unavoidably tax type specific remain in thevarious tax Acts• In some cases specific tax Act requirements apply in addition toTAA requirements e.g. VAT returns• Some substantive changes also proposed
95 SCHEDULE 1 TO TAA (2) • Amendments to paragraph 19 of Fourth Schedule: Estimates of taxable income (IRP6s) need only be submitted when required by the Commissioner (e.g. when an amount of provisional tax is payable)In the case of a first provisional tax payment the basic amount will not be increased by 8 per cent p.a. if an assessment has been raised for a year of assessment ending within 18 months before payment is dueAn assessment issued by the Commissioner up to 14 days before the date a provisional tax estimate is made, may be used to determine the basic amountEstimates made by the Commissioner in terms of paragraph 19(2) and (3) are no longer final and conclusive
96 SCHEDULE 1 TO TAA (3) • Amendments to section 17 of VAT Act: Proposed amendment provides that SARS will only approve an alternativemethod for the calculation of apportionment of input tax withregard to current or future tax periods and not past tax periods• Amendments to section 28 of VAT Act: To achieve aconsistent filing date for VAT but retain the incentive to e-file,vendors who e-file and make payment via e-filing must submitreturns by 25th (as is the case for others) but need only pay bymonth-end
97 More Info – www.IITF.org Advanced Diploma In Tax Procedural Law - client fundingProf D N Erasmus –I start with a quick overview of the Tax Administration Act
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