The Tax Administration Act of 2011 which was promulgated on the 4th July 2012 and is expected to shake up the tax environment came into yesterday with the exception of provisions dealing with interest. The South African Revenue Service (SARS) said in a statement provisions dealing with interest will come into effect at a later date.
The statement said the Act is intended to simplify and provide greater coherence in South African tax administration law.
“It eliminates duplication, removes redundant requirements and aligns disparate requirements that had previously existed in a number of different tax Acts. The Act creates a single, modern framework for the common administrative provisions of the tax Acts. It also aligns SARS with international best practice and modern tax administration”.
The statement added that the Act seeks to achieve a balance of rights and obligations between the South African taxpayer and SARS itself. The latter has raised a lot interests from tax payers as measure that is designed to ensure fairness. This is partly to be realised through establishment of a of Tax Ombuds office which will provide taxpayers with a low cost mechanism to address administrative issues that could not be resolved through SARS normal channels.
Observers have said that if the Tax Ombud is to be effective it must be independent. Graeme Palmer, a Senior Associate in the Commercial Department of Garlicke & Bousfield, said the Tax Ombud’s mandate is to review and address taxpayers’ complaints which relate to service, procedural or administrative matters arising from SARS applying the provisions of tax laws. “Before submitting a complaint to the Tax Ombud the taxpayer must first exhaust all other channels such as the local branch office, call centre and the SARS Central Complaints Office. Disagreements with SARS over the interpretation of law will still be dealt with through the objection, appeal and court processes”.
Palmer added that it will be the Tax Ombud’s function to resolve taxpayers’ complaints through investigation, mediation and recommendation. These procedures are to be conducted in an informal, fair and cost effective manner. “It is important that the Tax Ombud is seen to be objective and independent when reviewing or resolving complaints with SARS. Part of this challenge will be that their office will be staffed from employees seconded from SARS with all the expenditure connected with their functions being paid out of SARS funds”.
The Act also comes to give SARS powers to search business premises without a warrant. SARS said this is applicable in narrowly defined situations where the general requirement for a warrant would defeat the object of the search. It allows SARS to act when tax is at serious risk and time is of the essence.
“This Act affects every kind of tax administered by SARS with the exception of customs and excise and is the biggest change we have seen in tax administration for 20 years,” said Ettiene Retief from the South African Institute of Professional Accountants (SAIPA).
“Literally, everyone who is involved in the administration of tax—corporate tax departments, tax practitioners and even officials of SARS itself—needs to re-educate him- or herself about its implications.”
Retief said the new law consolidates most of the administrative elements relating to tax into a single piece of legislation. This should simplify the task of administering tax from the viewpoint of both taxpayers and tax collectors as the processes relating to each type of tax are no longer scattered across various pieces of enabling legislation.
From now onwards, SARS will have greater scope when it comes to protecting the interests of the fiscus, said Retief. For example, said Retief, SARS will now be able to raise a “jeopardy assessment” even before a tax year is complete if it has reason to believe that the collection of due tax could be under threat. Similarly, taxpayers who intend to be outside of the country for extended periods of time will now have to inform the tax authorities so that they can take action if they feel that due tax monies are under threat.
“On the one hand, it’s good that SARS has stronger provisions to collect the taxes the country needs, but I do have a concern that if it applies its new powers aggressively the taxpayer could be facing sleepless nights,” said Retief. “We have already seen SARS applying the previous regulations very aggressively in certain instances, and I am a little worried about how it will use its new powers. I hope it will take a wise approach as overly aggressive action could deteriorate tax morality.”