State to turn screws on rogue tax practitioners

Some practitioners complain about the unprofessional conduct of SARS officials, writes Amanda Visser

THE behaviour of some tax practitioners continues to bother the South African Revenue Service (SARS), but compliant practitioners have expressed frustration on their part over what they describe as the low level of education and poor quality service they get from its officials.

SARS commissioner Oupa Magashula says despite attempts by Finance Minister Pravin Gordhan to address the matter a year ago there has been no “substantial” improvement. Moreover, a compliance analysis of tax practitioners shows a number of “worrying trends” .

Such a harsh indictment of reckless tax practitioners shows little sign of the “enhanced relationship” bandied about as a solution a few years ago after a study of tax intermediaries.

The study was done by the British revenue authority and the secretariat of the Organisation for Economic Co-operation and Development (OECD).

The 2008 report looked at the need for a relationship between tax authorities, taxpayers and tax intermediaries that “favours collaboration over confrontation, and is anchored more on mutual trust than on enforceable obligations”.

SARS spokeswoman Marika Muller says there has been no direct follow-up to the report.

“SARS engages regularly with tax practitioner bodies so that SARS and the bodies can gain a better appreciation of the challenges each face and work together in addressing (these). Insofar as noncompliant individual practitioners are concerned, SARS will address the noncompliance with the practitioners and — if necessary — lodge complaints with their controlling bodies as provided for by law.”

Piet Nel, tax project director at the South African Institute of Chartered Accountants, says since the publication of the

There often is improper refunds being requested by cooking up the books

OECD report there has been no improvement in the relationship.

“It looks like these statements about noncompliance are made in public for tax practitioners to get their house in order, but their conduct is not reported to the professional bodies,” he says.

According to SARS, tax practitioners have 18,401 outstanding tax returns and also owe the taxman outstanding taxes in their personal capacity of about R243m.

The filing of personal income tax returns has been modernised and simplified substantially over the years. SARS has been on a drive to encourage individuals to file their returns themselves using its eFiling system.

However, according to Mr Nel, it is when things go wrong that taxpayers struggle if they have no assistance.

The government will this year usher in a new regulatory framework for the tax advisory industry, in a bid to hold practitioners accountable for the advice they give to taxpayers and, at the same time, to rid the industry of rogue practitioners.

Practitioners have to register with SARS and a recognised regulatory body before July, and are threatened with criminal sanctions if they fail to do so and continue to submit tax returns or provide tax advice for a fee.

Last year, Mr Gordhan launched SARS’ compliance programme for 2012-17.

This identifies five priority areas, including tax practitioners, wealthy South Africans and their trusts, clothing and textile imports and the illicit trade in cigarettes.

Mr Gordhan said in his bud- get speech last year “one shudders to think” what advice tax practitioners are giving their clients when many of them are not tax compliant.

Last week he said a number of tax practitioners seem to be specialising in attracting large numbers of clients on the promise they can “manufacture” numbers which will enable taxpayers to obtain improper refunds.

Mr Gordhan sounded a stern warning, saying such practitioners should not try to make a living out of defrauding the state, as sooner rather than later SARS would catch up with them.

He also referred to refunds amounting to R173bn, representing a 5.5% increase during the 2012-13 year. “There often is improper refunds being requested by cooking up the books in one

Tax system is so complex that … taxpayers cannot do it on their own

form or the other. More than R1bn of refunds were reversed because they were improperly obtained by taxpayers.”

Mr Nel says the role of tax practitioners — those who are compliant — is to ensure that their clients’ affairs are handled within the confines of the law.

“Since SARS has placed a huge compliance burden on normal taxpayers, they seek the assistance of a tax practitioner to help them with their tax affairs. The main issue is that our tax system has become so complex that ordinary taxpayers cannot do it on their own,” he says.

Mr Nel admits there are without a doubt unscrupulous tax practitioners in the market and even at large financial institutions, who are running schemes in a bid to minimise certain taxpayers’ obligations.

“Unfortunately, there is no distinction between the treatment given to those who act unscrupulously and those who do not,” says Mr Nel.

A medium-sized accountancy practice on the East Rand is critical of the calibre of SARS officials, saying it appears as if the agency is appointing people directly off the street.

“It is chaos. If we try to make an appointment with a SARS office, nobody reacts to our requests and when we arrive without an appointment, we are treated like dirt,” says the owner of the tax practice, who does not want to be identified.

He says the firm no longer wants to handle VAT registrations. It is not cost-effective as its staff are being sent from pillar to post and have to return eight times to the same SARS office with one application.

Sharon Smulders, head of tax technical and research at the South African Institute of Tax Practitioners, says tax practitioners carry a huge responsibility and are under “immense pressure” to give sound advice to their clients.

However, some of the institute’s members have complained that the conduct of officials at SARS is not as professional as it should be.

The institute is raising some of these issues with SARS.

“We have strict requirements on our side; it should be equally strict on their side as well, ” says Ms Smulders.

The institute has also had complaints from members about the educational level of some officials at SARS, who they claim are unable to assist with technical matters, she says.

Mr Nel says there are offices where people are on top of their game, but others are a “nightmare” to deal with.

A tax practitioner can wait for four weeks to get an appointment. He gave an example from his own experience of struggling for eight months to get a matter resolved.

Mr Nel notes that when one drives past a SARS office outside the filing season and taxpayers are queuing in the street, something is clearly wrong.

“If a salary earner files his tax return and it is assessed within 24 hours, then SARS is seen as the best institution in SA, but if something goes wrong it is almost impossible for him to sort it out by himself.”