Ten years of change

Finweek English Edition - - Advertising & Marketing -

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

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