TAXPAYERS face various obligations imposed on them as a result of the provisions
of the Tax Administration Act, No 28 of 2011.
Where, for example, a taxpayer
fails to submit a tax return timeously, the Commissioner: South African Revenue
Service is compelled to impose the penalty provided for in section 211 of the
Tax Administration Act.
Where a taxpayer receives an assessment and fails to
pay the tax reflected thereon within the time period allowed, the Commissioner
is empowered to file a statement at the court, which has the effect of a civil
judgment against the taxpayer, and once such judgment has been obtained, SARS
can seek to execute on the strength of that judgment.
Alternatively, the Commissioner may direct any third party holding funds
on behalf of the taxpayer to pay these over to the Commissioner and not to the
taxpayer.
The tough provisions of the Tax Administration Act against taxpayers is not balanced by available remedies against SARS officials who fail in their obligations |
These are but a few examples of the draconian powers which the
Commissioner has in addressing the failure on the part of the taxpayer to
comply with their obligations imposed under this act. But what remedy does a
taxpayer have where the Commissioner and his officials fail to adhere to the
obligations imposed on them under the Tax Administration Act?
Section 42 of the act requires that a SARS official involved in, or
responsible for, an audit under the provisions of the act 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. The Commissioner published the required Public Notice on 1 October last
year, setting out the timing of submission of the report to the taxpayer under
audit, as well as the details to be contained in that report.
In summary, those taxpayers who were subjected to an audit prior to the
commencement of the Tax Administration Act on 1 October 2012 were entitled to
receive a report advising as to the stage of completion of the audit no later
than 31 December 2012. We did receive a number of reports advising as to the
stage of completion of the audit, but in a large number of cases, such reports
were not submitted to taxpayers as required.
Where the audit on the taxpayer’s affairs commenced after October 1
2012, the Commissioner is required to submit a report to the taxpayer advising
as to the status of the audit within 90 days of the date of the audit’s
commencement. Such reports are not being issued as required, and the question
therefore arises what a taxpayer is entitled to do where the Commissioner’s
officials fail to comply with their statutory obligations.
Unfortunately, the Tax Administration Act itself does not contain any
remedy for the taxpayer, and the taxpayer would only have recourse to the
courts, on grounds that the Commissioner has failed to comply with the
taxpayer’s right to administrative justice enshrined in the Constitution and as
fleshed out in the Promotion of Administrative Justice Act, No 3 of 2000.
Where a taxpayer fails to pay tax when payable, the Commissioner is empowered
to seek a civil judgment for the recovery of the tax in terms of section 172 of
the Tax Administration Act. Previously, under the provisions contained in
section 91 of the Income Tax Act, No 58 of 1962, as amended, the Commissioner
was not required to inform the taxpayer that it was intended to seek a judgment
against the taxpayer.
The Tax Administration Act now requires at section 172(1)
that SARS is required to give the taxpayer at least 10 business days’ notice of
the intention to file a statement at the Court which would have the effect of a
judgment against a taxpayer. The only basis on which SARS is not required to
give the taxpayer prior notice of taking judgment against the taxpayer, is
where SARS is satisfied that giving notice would prejudice the collection of
the tax.
Unfortunately, we are seeing too many cases where the Commissioner has
proceeded to take judgments against the taxpayer after 1 October 2012 without
affording the taxpayer the 10-day notice period. Once a judgment has been taken
against the taxpayer, the only recourse available would be to seek SARS’s
assistance in withdrawing the certified statement filed at the Court under
section 176 of the Tax Administration Act, or, alternatively, to launch
proceedings in the High Court for an order rescinding the judgment.
Once a taxpayer has been subjected to an audit, SARS, invariably, will
issue an additional assessment to the taxpayer, and the taxpayer will then have
to decide whether to dispute the adjustments made and to lodge a formal
objection against that assessment. The Constitutional Court, in the Metcash
case, ruled that the so-called “pay now argue later” rule was valid, and did
not violate the rights contained in the Constitution.
However, a taxpayer is
entitled, under section 164 of the Tax Administration Act, to request that SARS
postpones the payment of the tax pending the finalisation of the objection or
appeal. The taxpayer is required to
submit a well motivated application requesting postponement of payment of tax
pending an objection or appeal, and must remember that, should the dispute
finally go against the taxpayer, that interest will remain payable from the
date on which the assessments were issued to the taxpayer. This can cause a
significant burden on a taxpayer where the dispute takes years to resolve.
It must be remembered that, under section 164(6) of the Tax
Administration Act, SARS may not take recovery steps against the taxpayer while
the taxpayer’s request for postponement of payment of tax in dispute is being
considered.
In practice, it has happened too often that a taxpayer has filed an
objection and simultaneously requested a postponement of payment of tax, under
either section 88 of the Income Tax Act or section 164 of the Tax
Administration Act, and does not receive a response from the Commissioner
whether their request for postponement of payment has succeeded. In some cases,
SARS has taken steps to recover the tax in dispute despite the fact that they
have requested postponement of payment of tax in dispute.
Where a taxpayer receives an additional assessment from SARS, it is
necessary that the taxpayer be advised as to the reasons for the adjustments
made in the calculation of taxable income or any other adjustments made in
assessments issued to the taxpayer for other taxes.
In many cases, the SARS
officials will comply with their statutory obligations and supply taxpayers
with reasons for adjustments made in the calculation of taxable income, but,
unfortunately, this is not always the case.
Taxpayers are entitled to call for
reasons for adjustments made to assessments in terms of rule 3(1)(a) of the
Rules Governing Objections and Appeals and, should the Commissioner fail to
supply the reasons requested, it would be necessary to launch an application to
the Tax Court under rule 26 of the Rules Governing Objections and Appeals.
Where a taxpayer disputes an assessment issued by the Commissioner, not
all disputes proceed to the Tax Court, as many disputes are now resolved via
the Alternative Dispute Resolution procedure. Once the matter has been settled,
the taxpayer and SARS conclude a settlement agreement, and the taxpayer is
deemed to have withdrawn their objection and appeal against the assessments
issued by SARS, and SARS is then required to issue amended assessments to give effect
to the settlement agreement.
Again, we
are currently seeing many instances of settlement agreements being concluded
without adjustments being made to the affected assessments. As a result,
taxpayers conclude a settlement agreement, pay what is required under that agreement
and then receive demands for the full amount which was originally in dispute. A
taxpayer can compel SARS to adhere to the settlement agreement only by launching
an application to the High Court, which should not be necessary if SARS dealt
with the matter timeously and properly.
SARS has extensive powers to gather information from taxpayers and
should a taxpayer fail to comply SARS can take various steps against the
taxpayer.
Many taxpayers applied for relief under the Voluntary Disclosure
Programme and Taxation Laws Second Amendment Act 6, No 8 of 2010 which came to
an end on 31 October 2011. SARS took a long time to evaluate the thousands of applications
received and it was common for SARS to advise a taxpayer that their application
had been considered and that the taxpayer must return the signed VDP agreement
within five working days despite the fact that SARS has had the application for
a period of almost 17 months.
Once the VDP agreement was signed the taxpayer
had to complete the VDP returns which were not dealt with in the law and invariably
taxpayers were given a very limited period of time to attend to the completion
of those returns. The imposing of undue pressure on taxpayers and their
advisers in this manner is inequitable.
The fact that officials do not adhere to their obligations under the Tax
Administration Act results in an increase in costs incurred by taxpayers, which
currently cannot be recovered from SARS unless an action is instituted in the High
Court and the court awards costs against SARS on a punitive basis.
The Tax Administration Act creates a legal framework to create the
office of Tax Ombud, and it is hoped that the creation of that office will
alleviate some of the issues identified above. SARS also requires under the Tax
Administration Act that all tax practitioners are registered with SARS, and a controlling
body which may take disciplinary action against tax practitioners who do not
adhere to the provisions of the law and the rules regulating tax practitioners.
Procedures are set down whereby complaints
against tax practitioners will be dealt with, but the process whereby a
taxpayer can lodge a formal complaint against the misconduct of a SARS official
is not well-known or publicised, and it is questioned whether this procedure exists.
It is unfortunate that the Tax Administration Act does not contain a specific
remedy to taxpayers where SARS officials fail to adhere to their obligations
imposed on them under the Tax Administration Act.
■ Dr Beric Croome is a tax executive at ENS. This article first appeared in Business Day, Business Law and Tax Review, 8 April 2013. Free image from ClipArt
Ironically this article is an example of one way traffic going the other way. SARS does not have the advantage of being able to write critical articles about specific taxpayers' actions or inaction, even if they are public companies or figures.
ReplyDeleteThe most it can do is respond to false statements that bring it into disrepute in limited circumstances or publish the details of those who have been convicted of tax offences by a court with no possibility further appeal.