Ten years of change
OCTOBER LAST YEAR marked SA Revenue Service’s 10th anniversary as an autonomous entity and this year marks 10 years since Pravin Gordhan joined, first as deputy commissioner and from November 1999 as commissioner.
From the time Gordhan joined Revenue he brought a social transformation outlook to the agency, making it a priority to change South Africa’s tax culture – to make it a “nation building” issue rather than simply a matter of compliance.
Many agree on the success of that philosophy. Michael Katz, chairman of corporate law firm Edward Nathan Sonnenbergs, says: “Were it not for the spectacular performance of Revenue in the gathering of funds, the entire socioeconomic dimension of SA would have been very different. The performance of Revenue has facilitated and enabled some vital Government expenditure to occur. The macroeconomic policy that’s gained so much admiration around the world has largely been enabled by virtue of Revenue’s performance.”
However, while Gordhan has repeatedly described his job as being to keep taxpayers honest, many of SA’s corporates and practitioners bridle at the idea that they’re not already honest. As with all law enforcement, Revenue treats the honest and dishonest in the same manner – guilty until proven innocent.
Johan Kotze, director at Hofmeyr Tax and Secretarial Services, says many taxpayers don’t take kindly to that treatment. Says Kotze: “It views everyone the same: the person who wilfully evades tax is the same as the person who for reasons of insolvency simply can’t pay, who is the same as the businessman who doesn’t agree with Revenue’s interpretation and has lodged an objection. To Revenue those are all equally ‘dishonest’. The commissioner’s view is that it’s his view or no view.”
Ernest Mazansky, director at Werksmans Tax, says tax practitioners such as Werksmans and other large law and accounting firms “probably do more for tax compliance in SA than Revenue itself could ever do”.“We see the transaction up front – not 18 months later when the tax return is done. We guide the client in doing the tax aspects correctly. Sometimes we find a client structuring a transaction – albeit innocently but nonetheless in contravention of tax laws – and we guide the client away from that,” says Mazansky.
“That’s the role of the tax practitioner: assisting clients to comply with the law in the most tax efficient manner. It’s not, as many at Revenue all too often believe, to connive to deprive the fiscus of its rightful due.”
Many practitioners believe corporate society’s view of tax has gone past the issue of tax morality: no reputable business would dream of trying to evade tax. But there are many issues relating to interpretation of SA’s tax laws and, unfortunately, few judgments to create certainty.
Kotze adds: “Because you believe a transaction doesn’t fall within the ambit of a particular section of the Act does that mean you’re evading tax?”
In any tax dispute the odds are stacked in Revenue’s favour. For example, a taxpayer has 30 days to lodge an objection or an appeal to a tax assessment, following which Revenue is obliged to provide its decision thereon within 90 days. Kotze says Revenue rarely complies with its own timeframes and then the taxpayer has to force “Revenue to do what it’s legally obliged to do” at great cost. That effectively gives Revenue more time to prevaricate.
“I believe if Revenue fails to comply with the timeframe, the disputed assessment should immediately be struck down. If Revenue hasn’t been able to justify its assessment it should not be given a second chance. It’s extremely expensive for taxpayers to go to court to force Revenue to do what it’s constitutionally obliged to do ,” says Kotze.
SARS rarely complies with its own timeframes. Johan Kotze