Re­ceiver gets wide-rang­ing pow­ers

Pro­posed bill en­ti­tles SARS to a de­tailed search of a busi­ness premises with­out hav­ing to ob­tain a war­rant

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - GARY VO­GEL­MAN & JANEL STRAUSS

THE third draft of the long awaited Tax Ad­min­is­tra­tion Bill was re­cently pub­lished for a fi­nal com­ment. The Tax Ad­min­is­tra­tion Bill is an ini­tia­tive to in­cor­po­rate cer­tain generic ad­min­is­tra­tive pro­vi­sions that are cur­rently du­pli­cated in the dif­fer­ent tax statutes into one piece of leg­is­la­tion.

Since the bill is now near­ing the fi­nal stages of the leg­isla­tive process, ev­ery tax­payer re­quires a ba­sic knowl­edge of its im­pli­ca­tions.

The bill pro­vides for a reg­is­tra­tion sys­tem whereby tax­pay­ers will reg­is­ter for all tax types by means of a sin­gle reg­is­tra­tion form. For in­stance, an en­ter­prise will no longer have to reg­is­ter sep­a­rately for in­come tax and value-added tax (VAT). The South African Rev­enue Ser­vices (SARS) may, how­ever, al­lo­cate var­i­ous ref­er­ence numbers to one tax­payer to dif­fer­en­ti­ate be­tween var­i­ous tax mat­ters. Should the tax­payer cor­re­spond with SARS with­out men­tion­ing the al­lo­cated ref­er­ence num­ber, SARS may dis­re­gard such cor­re­spon­dence.

In most in­stances reg­is­tra­tion must take place within 21 busi­ness days from be­com­ing li­able or en­ti­tled to reg­is­ter un­der a tax act. “Busi­ness days” now also ex­cludes days from De­cem­ber 16 to Jan­uary 15 each year. Do not be sur­prised if SARS asks you to wink at them while you reg­is­ter, as “bio­met­ric in­for­ma­tion” may now be used to au­then­ti­cate the iden­tity of an in­di­vid­ual. This in­cludes any bi­o­log­i­cal data, such as retina, voice, fa­cial or fin­ger­print recog­ni­tion. SARS is, how­ever, obliged to put mea­sures in place to se­cure the con­fi­den­tial­ity and pro­tec­tion of such per­sonal data.

In line with the sin­gle reg­is­tra­tion sys­tem, a sin­gle tax­payer ac­count­ing sys­tem will also be in­tro­duced. Tax­pay­ers will have one tax ac­count with a rolling bal­ance of all out­stand­ing taxes. Pay­ment al­lo­ca­tion rules may be ap­plied in re­spect of a spe­cific tax type and SARS may re­cover taxes by ap­ply­ing the first-in-first-out rule. This could give rise to some is­sues where the amounts of cer­tain taxes are in dis­pute and oth­ers are not.

SARS of­fi­cials are now cat­e­gorised into three tiers and de­ci­sion-mak­ing pow­ers and func­tions are as­signed ac­cord­ingly. The three lev­els are:

(i) The Com­mis­sioner per­son­ally; (ii) “Se­nior SARS of­fi­cials”; (iii) Lastly, “or­di­nary SARS of­fi­cials”. The pow­ers that may be ex­er­cised by se­nior SARS of­fi­cials are usu­ally more se­ri­ous and have more ef­fect than the pow­ers ex­er­cised by or­di­nary of­fi­cials. All SARS of­fi­cials must carry SARS iden­ti­fi­ca­tion cards when­ever car­ry­ing out pow­ers un­der the tax laws.

Cer­tain of SARS’ pow­ers are sub­stan­tially ex­tended by the bill, for ex­am­ple their in­for­ma­tion-gath­er­ing pow­ers. If a per­son be­comes “ob­jec­tively iden­ti­fi­able” by SARS, rel­e­vant ma­te­rial re­lat­ing to that per­son may be pro­cured from that per­son or from third par­ties.

SARS may with­out prior no­tice ar­rive at and in­spect premises to de­ter­mine the iden­tity of the per­son oc­cu­py­ing the premises, whether that per­son is con­duct­ing a trade or an en­ter­prise, or whether the per­son is reg­is­tered for tax and keeps the re­quired records.

A de­tailed search of a busi­ness premises may be car­ried out by SARS with­out a search war­rant if a se­nior of­fi­cial has rea­son­able grounds to be­lieve that there may be an im­mi­nent re­moval or de­struc­tion of rel­e­vant ma­te­rial likely to be found on the premises and that the de­lay in ob­tain­ing a war­rant from a court would de­feat the ob­ject of the search and seizure. Such strong pow­ers raise a num­ber of con­sti­tu­tional is­sues.

Tax­pay­ers may also be in­vited to in­for­mal ex­am­i­na­tions at a SARS of­fice for pur­poses of be­ing in­ter­viewed re­gard­ing their own or an­other per­son’s tax af­fairs. In the event of such an in­vi­ta­tions, tax­pay­ers should ob­tain le­gal ad­vice to en­sure that they are in­formed of their rights at the meet­ing.

In line with in­ter­na­tional prac­tice, SARS may now also is­sue “jeop­ardy as­sess­ments” which en­tail that tax­pay­ers may be as­sessed for taxes which will only be­come due in fu­ture.

Ac­cord­ing to SARS, the bill seeks to achieve a bal­ance be­tween the pow­ers of SARS on the one hand and the rights of tax­pay­ers on the other.

In terms of the so-called “pay now, ar­gue later” prin­ci­ple, tax­pay­ers are obliged to pay out­stand­ing taxes im­me­di­ately, de­spite a pend­ing ob­jec­tion or ap­peal. This obli­ga­tion may now be sus­pended at the dis­cre­tion of a se­nior of­fi­cial. The of­fi­cer must con­sider cer­tain cri­te­ria, such as the com­pli­ance his­tory of the tax­payer, the amount of tax in­volved and the abil­ity of the tax­payer to pro­vide se­cu­rity for the pay­ment.

Should it be de­cided that the pay­ment may not be sus­pended, SARS may not re­cover the tax for an­other 10 busi­ness days. In this way the tax­payer is given a rea­son­able op­por­tu­nity to con­sider fur­ther rights.

Once a tax is re­cov­er­able the bill re­duces the cur­rent 30-year pre­scrip­tion pe­riod for col­lec­tion of the debt to 15 years.

Sub­ject to cer­tain ex­cep­tions, a tax­payer must be kept well in­formed dur­ing a SARS au­dit.

The tax­payer is en­ti­tled to fre­quent progress re­ports of the au­dit, in­clud­ing a writ­ten no­ti­fi­ca­tion of the fi­nal out­come. The tax­payer must also be given an op­por­tu­nity to re­spond to the au­dit find­ings. The leg­is­la­tion also sep­a­rates au­dits from crim­i­nal in­ves­ti­ga­tions to en­sure that ac­cused tax­pay­ers can en­force all their con­sti­tu­tional rights.

The bill cre­ates the of­fice of the tax om­bud, which pro­vides for a sig­nif­i­cant change to the dis­pute res­o­lu­tion sys­tem when it comes to ser­vice, pro­ce­dural or ad­min­is­tra­tive dif­fi­cul­ties.

The man­date of the tax om­bud will be to re­view and me­di­ate com­plaints, to make rec­om­men­da­tions to SARS and to re­port di­rectly to the Fi­nance Min­is­ter.

The tax om­bud is not in­tended to usurp the role of SARS’s ex­ist­ing in­ter­nal mech­a­nisms, the pub­lic pro­tec­tor or the courts. It is an additional low-cost av­enue to re­solve ad­min­is­tra­tive dif­fi­cul­ties, lo­cated be­tween SARS’s in­ter­nal mech­a­nisms and the ex­ist­ing ex­ter­nal mech­a­nisms.

While the ex­ten­sion of SARS’ pow­ers are aimed at tar­get­ing tax evaders more ef­fec­tively, the Tax Ad­min­is­tra­tion Bill also seeks to en­sure a bet­ter ser­vice, ef­fi­ciency and sim­plic­ity to hon­est and com­pli­ant tax­pay­ers. The bill pro­vides for a per­ma­nent vol­un­tary dis­clo­sure pro­gramme ap­pli­ca­ble across most tax types (ex­clud­ing cus­toms and ex­cise), un­less the tax­payer in­volved is sub­ject to a pend­ing or ex­ist­ing au­dit or in­ves­ti­ga­tion by SARS.

How­ever, the per­ma­nent vol­un­tary dis­clo­sure pro­gramme un­der the bill is not as ac­com­mo­dat­ing as the cur­rent tem­po­rary vol­un­tary dis­clo­sure pro­gramme avail­able to tax­pay­ers un­til Oc­to­ber 31.

Even though the bill may strive to achieve a bal­ance be­tween the pow­ers of SARS and the rights of tax­pay­ers, the sup­ple­mented pow­ers of SARS should not be un­der­es­ti­mated.

Tax­pay­ers should now, more than ever, en­sure that their tax af­fairs are in or­der and must de­velop a full un­der­stand­ing of the ex­tent of their rights so that these rights can be ex­er­cised when nec­es­sary.

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