New Release : "Income Tax in South Africa: The First Hundred Years (1914 - 2014)"

IMPORTANT ANNOUNCEMENTS

Please note due to serious health issues 

blog posts and social media will be irregular for the early part of 2016.

I'd like to thank my clients, my empoyer ENSafrica, 

my colleagues and professional associates, 

and my family and friends for the continued support 

and encouragement during this time. 

I look forward to soon returning at full strength.

***

A new monthly article will be published in March 2016

***

In 2014, twenty years since South Africa became a constitutional democracy, 

the University of Cape Town marked this milestone with 

the "INCOME TAX IN SOUTH AFRICA: THE FIRST 100 YEARS 1914 – 2014" conference.  

I was privileged to be part of this special occasion 

and presented a paper called 

"The shift to a constitutional democracy in 1994 and the impact thereof on tax law in SA." 

This paper (see Part 6: Constitutional, policy and gender issues), 

together with all the other conference papers, 

has now been published by Juta Law.

You can buy your copy here - further information below. 

Income Tax in South Africa The First 100 Years (1914 - 2014)

Edition: 1st

Expected publication date: 17 February 2016

Editors: J Hattingh, J Roeleveld, C West

ISBN: 978 1 48510 779 8

Format: Soft cover

Extent: 506 pages

Retail price: R550   (Price incl. VAT, excl. courier delivery and is valid until 30 June 2016)

About this publication:

This book, marking the 2014 centenary of income tax in South Africa, presents historical research covering a range of topics.

The authors begin with the international origins of income tax law and the transformation of old Dutch taxes into colonial income tax, and the role of General Smuts in the introduction of income tax in 1914.

The struggle to find an appropriate means of taxing corporate profits of shareholders is shown to have continued for decades, and mining and farming as main industry players in the South African economy receive special attention. The demise of cooperatives, the history of international tax treaties and the colonial influence also form part of the historical journey of this publication.

An examination of the special qualities of leading judges of the time and their jurisprudence provides much food for thought. Policy debates such as whether South Africa should follow the source or the residence system of taxation, or introduce a land tax, rage today as they did in 1914.

The impact of transformation since 1994, the need to entrench taxpayers’ rights and to remove gender inequality, and the remarkable modernisation of SARS, all played an important part in the development of the South African tax system.

A book about one hundred years of income tax would not be complete without some biographical notes on key personalities such as CJ Ingram KC, Aubrey Silke and David Meyerowitz SC. In recognising the conference held at the University of Cape Town to mark one hundred years of income tax in South Africa, the rise of the teaching of tax at UCT is presented in the form of an extract from the memoirs of Prof Leon Kritzinger.

“I congratulate the authors and editors for their work in this book. Not only will it be the standard reference on the development of income tax in South Africa, but also, for those interested in tax as a vital social and economic issue, it provides entertaining, informative and enlightening reading.’’ – Richard Vann, Challis Professor of Law, University of Sydney

                                                                    

Contents include:

Part 1: The international origins of income tax in South Africa and its introduction               

·       Importing and exporting income tax law: The international origins of the South African Income Tax Act – Peter Harris          

·       The history of income taxation in the Cape Colony: A story of dangerous beasts and murderous fathers – Enelia Jansen van Rensburg

·       On the introduction of income tax in South Africa by JC Smuts: Three eventful months (24 April 1914 to 20 July 1914) – Johann Hattingh

·       The birth of the first Income Tax Act: The journey begins – Peter Surtees

Part 2: The taxation of companies, shareholders and partnerships                           

·       Corporate-shareholder taxation in South Africa: 1914 to 1961 – Johann Hattingh

·       The road to dividend withholding tax in South African income tax law (1962 to 2014) – Jennifer Roeleveld

·       A review of the taxation of partnerships in South Africa over the last 100 years - Afton Titus

Part 3: The taxation of mining, farming and co-operative enterprises

·       South Africa’s gold mining tax regime – Roshelle Ramfol

·       The history of the taxation of farming in South Africa – Charl du Toit

·       The development of the taxation of co-operatives – Tracy Johnson, Jennifer Roeleveld

Part 4: Income tax jurisprudence

·       A century of income tax jurisprudence in South Africa – Eddie Broomberg

·       Some missteps on South Africa’s road to a coherent income tax jurisprudence – RC Williams

Part 5: International tax

·       From colonialism to apartheid: International influence on tax treaties in South Africa (1932 to 1990) – Craig West

·       Ensuring a right balance in applying the residence and source bases of taxation in order to protect South Africa’s tax base – Annet Wanyana Oguttu

Part 6: Constitutional, policy and gender issues

·       The shift to a constitutional democracy in 1994 and the impact thereof on tax law in South Africa – Beric J Croome

·       Land tax versus income tax: A historical assessment of success and failure in South Africa – Nicolaus Tideman and Peter Meakin

·       The personal income taxation of women in South Africa: An overview since the 1970s – Elizabeth Gavin and Wynnona Steyn

Part 7: Major figures in the development of income tax in South Africa

·       CJ Ingram K.C.: Academic pioneer and second President of the Cape Tax Court – Albertus Marais

·       Aubrey Silke – Adapted courtesy of the South African Institute of Tax Practitioners

·       David Meyerowitz SC – Adapted courtesy of the South African Institute of Tax Practitioners

·       Memoirs of Prof. Leon Kritzinger: Aubrey Silke and the importance of postgraduate tax studies at the University of Cape Town – Leon Kritzinger

Part 8: The evolution of the South African Revenue Service: 1994 to 2014 - SARS                           

Table of cases

Table of statutes

Of interest and benefit to:

·       Tax academics and post-graduate students

·       Tax practitioners

·       Tax historians and researchers

You can buy your copy from Juta Law here

Review of Tax Administration Second Edition (Juta Law, 2015)

Below is the first review of Tax Administration Second Edition:

Lodging a Complaint against the South African Revenue Service

The Tax Administration Act No. 28 of 2011 (“TAA”) which took effect on 1 October 2012 created the Office of the Tax Ombud to deal with complaints against the South African Revenue Service (“SARS”) empowering that office to deal with complaints made by a taxpayer regarding a service matter or procedural or administrative matter arising from the application of the provisions of a tax Act by SARS.

Before a taxpayer can lodge a complaint with the Office of the Tax Ombud, it is important that they have exhausted the internal complaints resolution mechanisms within SARS, unless there are compelling circumstances to do so. The TAA prescribes what constitutes compelling circumstances and those are not dealt with further in this article.

During September 2015 SARS refined the process a taxpayer must follow when lodging a complaint regarding the manner in which they have been dealt with by SARS. According to the SARS website  a complaint is a grievance or some other type of dissatisfaction experienced by a taxpayer, trader or representative relating to a process, including queries, returns or any other service request or a service experience that is not adequately resolved.

The SARS guidelines dealing with complaints makes it clear that SARS’ processes should be fully exhausted to resolve a taxpayer’s query before a formal complaint is lodged. Where the taxpayer remains dissatisfied with the service after their normal interaction with SARS, they are entitled to complain against SARS. It must be noted that where a taxpayer disagrees with an assessment or any decision taken by SARS, it is necessary to follow the formal dispute resolution process and to lodge an objection against the assessment raised. The complaints process cannot deal with the merits or otherwise of an assessment issued by SARS.

Where a taxpayer is dissatisfied with SARS’ service or processes, it is necessary to have a case number first, particularly where a taxpayer wishes to complain about missing documentation, quality or speed of service or unresolved issues.

Image purchased from www.iStock.com ©iStock.com/Wavebreakmedia

Taxpayers are required to submit a complaint via e-filing which means that the complaint will be tracked electronically or alternatively by calling the SARS Complaints Management Office (“CMO”) on 0860121216. In order to complain via e-filing, the taxpayer must be a registered e-filer to complete and submit the complaint form. Previously taxpayers were unable to lodge complaints electronically which meant that complaints were not capable of comprehensive tracking and follow up.

Where a taxpayer is unable to file a complaint via e-filing, they may seek assistance from a SARS agent to complete the complaints form on their behalf when contacting the CMO. When lodging a complaint, a taxpayer is required to indicate the nature of the complaint and to categorise the complaint into one of the specified categories. According to the SARS website, the categories of complaints and examples relating thereto are as set out below:

            “No.        Category                                               Example

                1              Legal/Policy                                          For example, debit cards not accepted for payments.

                2              Employee behaviour/Competence For example, agent X was rude, or agent did not know how to assist

                                                                                                me.

                3              Channel experience/environment/  For example, contact centre is very slow to answer, or there is no

                                technical issues                                   parking at branch X.

                4              Quality and speed of service            For example, incorrect resolution of request, or it took 6 months to

                                                                                                process my banking detail change.

                5              Unresolved service/operational       For example, turn-around-time exceeded and my return has not yet

                                matter                                                    been processed.

                6              Missing or lost documentation          For example, I have submitted my return, but SARS cannot find it.”

Where a taxpayer wishes to lodge a complaint relating to the quality and speed of service, or an unresolved service operational matter or missing or lost documentation, the taxpayer must submit a case number first. Thus, the taxpayer’s complaint will only be accepted if there is already a case logged on SARS’ systems and the case number is inserted on the complaints form.

SARS has indicated that once a taxpayer has complained, they will receive either a text message or email notification at various stages of the process confirming that the complaint has been received. It is intended that the resolution date will be a maximum date of 21 days after the complaint has been logged with SARS. Where the taxpayer remains dissatisfied with the outcome utilising the SARS internal complaints process, the taxpayer may lodge a formal complaint with the Office of the Tax Ombud.

SARS published a document entitled “Guide to the Complaints Functionality on E-filing” setting out how taxpayers and tax practitioners can lodge complaints via e-filing in respect of the taxpayer’s own affairs or in respect of the affairs of taxpayers managed by a tax practitioner.

Where the taxpayer remains dissatisfied after having followed the internal complaints process at SARS, they are entitled to file a complaint with the Office of the Tax Ombud, which office will determine whether the complaint falls within the mandate of that office and advise the taxpayer accordingly. The Tax Ombud intends to finalise complaints made by taxpayers within 15 business days of receipt of the taxpayer’s complaint. Where the Tax Ombud anticipates that the complaint will not be resolved within the specified time period, the Office will advise the taxpayer thereof.

The Tax Ombud recently tabled its annual report for 2014/2015 in Parliament as required under the TAA. That report indicates that during the twelve months under review, 1277 complaints were received from taxpayers, of which 861 were rejected on the basis that the complaints fell outside of the ambit of the Tax Ombud’s mandate or that the taxpayer had failed to exhaust SARS’ internal complaints process. Of the 409 complaints accepted by the Tax Ombud, 75% were resolved in favour of the taxpayer.

The Tax Ombud’s report identifies the most important categories of complaints lodged by taxpayers against SARS and these related to problems relating to the following areas:

·                Withdrawal of assessments by SARS

·                Delays in refunds

·                Changes in banking details of taxpayers

·                Identity theft

·                Turn-around time on objections and appeals

·                Outcomes of objections/appeals not implemented by SARS

·                Debt procedures not adhered to by SARS

·                Undue delay in issuing of tax clearance certificates

It must be remembered that the Office of the Tax Ombud cannot compel SARS to adhere to the finding made by the Ombud’s office but where SARS chooses not to adhere to the recommendations made by the Tax Ombud, that will be reported to Parliament. Thus, SARS must have  very sound reasons not to accept the recommendations made by the Tax Ombud, particularly when reference is made to the provisions of the Constitution.

In conclusion, where taxpayers are aggrieved with the manner in which they have been dealt with by SARS officials or SARS has failed to resolve the taxpayer’s complaint properly, they are entitled to take that up with the Office of the Tax Ombud and based on experience in practice, the Office of the Tax Ombud is having the desired effect in resolving complaints made by taxpayers against SARS. Taxpayers are therefore urged to lodge complaints with the Office of the Tax Ombud once they have failed to resolve the matter utilising SARS’ internal complaints processes.

Dr Beric Croome is a Tax Executive  at ENSafrica This article first appeared in Business Day, Business Law and Tax Review, November 2015. 

Preservation Order and the South African/Australian Double Taxation Agreement

On 20 August 2015 the Supreme Court of Appeal delivered its judgment in the case of M Krok & Jucool Enterprises Inc. v The Commissioner for the South African Revenue Services which related to an appeal from the Gauteng Division of the High Court regarding the correctness of the confirmation of a preservation order granted by Fabricius J in the context of the South African and Australian Double Taxation Agreement (“DTA”).

The DTA was concluded by the two countries on 1 July 1999 and subsequently altered by way of a Protocol signed on 31 March 2008 which catered for the states to assist each other in the collection of taxes. During January 2012 and February 2013, the Australian Tax Office (“ATO”) requested the assistance of the Commissioner: South African Revenue Service to assist it in the collection of taxes allegedly due by Mr M Krok to the Australian Commissioner of Taxation in the sum of Australian $25 361 875.79 plus interest for the period 30 June 2004 to 30 June 2009. The ATO therefore required SARS’ assistance in the conservancy of Mr Krok’s assets located in South Africa pending the collection of the tax debt and a formal request was made accompanied by the certificate required under section 185 of the Tax Administration Act, No. 28 of 2011 (“TAA”).

Image courtesy of https://www.ato.gov.au 

Mr Krok emigrated to Australia from South Africa during April 2002 and prior to his emigration a trust of which he was a beneficiary vested the capital assets of that trust in Mr Krok. Thus, Mr Krok held the assets received from the trust in addition to his personal assets.

The distribution was made by the South African trust in order to reduce capital gains tax in the future and also to allow for the remittance of income under the exchange control regulations. Pursuant to Mr Krok’s emigration from South Africa, he contended that he ceded all South African income and assets to a foreign company, Polperro, held by a foundation located in Lichtenstein. Subsequently during December 2008 Mr Krok emigrated from Australia to the United Kingdom. Mr Krok contended that as part of his emigration planning to United Kingdom, Polperro was liquidated and the assets owned by him were transferred to Jucool Enterprises Inc., a company incorporated in the British Virgin Islands and held by a Jersey Trust.

During 2009 the ATO conducted an audit of Mr Krok’s tax affairs covering the period February 2003 to February 2010.

As a result of the ATO’s investigation into Mr Krok’s affairs, the ATO concluded that Mr Krok had failed to declare income derived by him for Australian tax purposes in respect of assets held by him in South Africa while an Australian resident. The various transactions whereby assets were transferred from Mr Krok to the foreign companies were never disclosed to SARS or the ATO. 

The ATO reached the conclusion that Mr Krok retained legal and beneficial interest in the assets and that the alleged assignment of his rights and interest of the capital and income of the assets to the foreign company violated South African exchange control regulations and was a sham. Consequently, the ATO adjusted Mr Krok’s tax returns and issued notices of assessment reflecting tax and penalties. The objections lodged by Mr Krok to those assessments were disallowed by the ATO.

As a result of the ATO’s request for assistance under the DTA, SARS launched an application for a preservation order under section 163 of the TAA. Mr Krok contended that the tax claimed by the ATO fell outside of the scope of the DTA on the basis that the Protocol came into effect on 12 November 2008 and therefore should only apply in respect of income or profits and gains of any year of income beginning after 1 July 2009.

Jucool contended that it had legal title to the assets and that the assets were therefore not owned by Mr Krok. Thus, Mr Krok’s primary argument was that the DTA did not apply on the basis that the tax in issue did not arise on or after 1 July 2009. The court considered the Vienna Convention on the Law of Treaties of 1969 and reached the conclusion that the Protocol concluded by South Africa and Australia applied to all tax debts, whether they arose before or after the date on which the Protocol was agreed to.

The court referred to the fact that the arguments raised by Mr Krok were dismissed in the case of Ben Nevis (Holdings) Ltd and Metlika Trading Ltd v Commissioners for HM Revenue and Customs. That case considered the provisions of the tax treaty between South Africa and the United Kingdom regarding an appeal in which similar issues to those raised in the Krok case were considered in the context of a similar article to a 2002 DTA between those two countries as amended by a 2010 Protocol. 

In the Metlika case the taxpayer argued that the 2010 Protocol precluded mutual assistance in the collection of tax debts which arose before 1 January 2003. The United Kingdom court disagreed with Metlika and accordingly allowed the United Kingdom Revenue to assist SARS in the collection of amounts allegedly due to it. The Supreme Court of Appeal therefore held that there was no merit in the taxpayer’s point on retrospectivity and that the provision of Article 25A allowing for reciprocal assistance in the collection of tax applied regardless as to when the income tax debt arose.

Furthermore, the court rejected Jucool’s contention that it was the beneficial owner of the assets in question and not Mr Krok.

Thus, the Supreme Court of Appeal confirmed the decision of the High Court authorising SARS to assist the ATO in recovering the tax allegedly due by Mr Krok to the ATO, despite the fact that the tax arose prior to the date on which the Protocol took effect.

Taxpayers therefore need to be aware that where they incur a tax debt in one country, that country may seek assistance in the recovery of those amounts from the assets held by a taxpayer in another country with which a DTA has been concluded.

Dr Beric Croome is a Tax Executive  at ENSafrica This article first appeared in Business Day, Business Law and Tax Review, October 2015. 

International Fiscal Association 69th Annual Congress 2015

 I was privileged to be invited to be the South African Branch Reporter and also a panelist for "Subject 2: The Practical Protection of Taxpayers' Rights" at the International Fiscal Association's 69th Annual Congress in Basel 2015

IFA BASEL2015 Registration Hall at the Exhibition Centre in the Messeplatz

 One of the many "goody bags" from various sponsors of the conference:

   Arriving at the opening function and chatting to Professor Jennifer Roeleveld

 of IFA-SouthAfrica,  hosts of the IFA Annual Congress in 2022.

  Chatting to Prof Dr Pasquale Pistone of the IBFD 

and member of the Permanent Scientific Committee of the IFA 

  Prof Craig West, Prof Jennifer Roeleveld, UCT Masters student Louise Möeller 

and Prof Johann Hattingh of University of Cape Town at Ms Möller research board.  

Both IFA-South Africa and Prof Johann Hattingh snapped photos as I was presenting

 on the panel for Subject 2: The Practical Protection of Taxpayers' Rights

 

Prof Jennifer Roeleveld chairs IFA Basel seminar on Taxpayers' Rights & International Exchange of Information. 
Prof Craig West as secretary.  Photo courtesy of Prof Johann Hattingh. 

   The Gala Dinner had a variety of talented performance artists to entertain us

 The IFA flag being handed from Switzerland (Congress Host 2015)

 to Madrid (Congress Host 2016)

   After the congress was over, my wife and I stayed in 
the remote mountain village of Pianazzola, Italy

  then onto Milan for an orchestral concert at Teatro de alla Scala 

and a visit to Castello Sforza

Homeward bound! Waiting in Zurich Airport for flight LX288 to Johannesburg, 

the last flight of the day to depart from Zurich.

New Release: "a stranger in a strange land" by Judy Croome

I've been asked when my wife's next book will be available. 
It's now available in both print and eBook. 
Click here for a review of the book by Vine Leaves Literary Journal(UK)
and click here for a review by Readers' Favorites (USA)

The links to purchase it are below the book details.

Aztar Press is proud to announce the release of

"a stranger in a strange land" Judy Croome's latest volume of poetry.

Purchase in South Africa from Loot or directly from Aztar Press.

Purchase internationally from Amazon, Barnes and Noble, Kobo and others.