The second draft of the Tax Administration Bill contains a number of new proposals, including provisions for a tax ombud and a permanent framework for relief for people who disclose voluntarily that they have failed to declare all their taxable income.
The new provisions are based on comments on and a further review by the South African Revenue Service (SARS) of the first draft of the bill, which was released late last year.
A provision permitting SARS to, without obtaining a warrant, search business premises and seize material it needs to investigate your failure to comply with your tax obligations or tax offences, has been retained in the new draft bill.
At a briefing to a joint meeting of Parliament's standing and select committees on finance this week, SARS officials explained that they need these powers to deal with the limited number of people who SARS believes will destroy or remove documents to prevent SARS determining their non-compliance with tax laws or tax evasion.
SARS Commissioner Oupa Magashula says SARS conducts only about 30 searches a year and in most cases will apply to a judge for a warrant.
The bill proposes that a permanent framework of relief for the voluntary disclosure of undeclared income or unpaid taxes be put into law. This will ensure relief from administrative penalties, additional tax and criminal charges if you voluntarily make a disclosure to SARS.
In terms of this permanent voluntary disclosure programme (VDP), any interest you are liable for on the outstanding tax will not be waived, as doing so would encourage people to default.
A temporary VDP, which began this month and will run until October next year, does offer relief from interest on the outstanding tax.
Tax ombud
The proposed Tax Ombud will hear complaints only about administrative matters, poor service and the failure by SARS to respect your rights, Magashula told the finance committees.
The proposed Tax Ombud will be appointed by the Minister |of Finance and will report |service failures and failures to protect taxpayer rights to the minister, Magashula says.
Disputes about the interpretation of tax laws will still go through SARS's objection and appeal process, and, should you choose to use it, its alternative dispute resolution process.
Alternatively, you can take your case to the Tax Board, the Tax Court or the normal court system. If SARS takes too long to deal with your objections this will be a service issue you can pursue with the Tax Ombud.
Magashula says the proposed Tax Ombud is a hybrid of the systems used in the United Kingdom and Canada. Care was taken to ensure that the ombud is independent of SARS but does not intrude on the role of the Public Protector or the courts.
He says the Tax Ombud will be funded from SARS's budget and will make use of staff seconded from SARS.
The new ombud will have powers to review decisions and to mediate on complaints but will not be able to issue determinations such as ordering SARS to pay a refund, Magashula says.
Complaints will have to be lodged with SARS first. If SARS fails to deal with the issue, you can take the matter to the centralised SARS Service Monitoring Office. If that fails you will be able to approach the ombud, although there are exceptions when you should be able to take a complaint directly to the ombud.
If your complaint is not dealt with to your satisfaction by the Tax Ombud, you will still be able to go to the Public Protector or to the courts.
Search and seizure
Recently, the Tax Court found a taxpayer who had devised an elaborate tax-dodging scheme liable for R1.2 billion. This included 200-percent additional tax for intentional evasion, Magashula told the committees.
He says the case took a decade to bring to the Tax Court, because the taxpayer had opposed every procedural action taken by SARS. Some of the assets were dispersed overseas. If SARS had had the recovery powers proposed in the new bill, more money and assets would have been recovered.
Franz Tomasek, SARS's group executive for legislative drafting and research, told the finance committees that SARS officials will be able to search for and seize documents when a senior official has reasonable grounds to believe that relevant material will be destroyed or removed.
Before being able to conduct a search without a warrant, SARS will also have to have grounds to believe that it would get a warrant if it applied to the court, and that the delay to obtain one would defeat the object of the search and seizure.
Tomasek says the Constitutional Court has held that there are times when a search without a warrant and the seizure of documents are justified and constitutional. He says that this power can be used only in very narrow circumstances, and that there are more than 15 other pieces of legislation in South Africa that also allow warrantless search and seizure.
Clauses have also been inserted to enhance taxpayers' rights when their premises are searched.
ALSO IN THE NEW BILL
According to the presentation to Parliament, the new tax bill also:
- Proposes to ensure that you are generally entitled to interest on a refund from the same date on which SARS would have been entitled to charge interest on unpaid tax.
- Makes changes to the pay-now-argue-later rule to ensure greater fairness. If the proposal is accepted, taxpayers will be able to request a suspension of the obligation to pay the assessed tax before they object to an assessment. While your request for suspension is being considered, SARS will not be able to collect tax from you unless it has grounds to believe you may disperse the assets to avoid paying your tax debt. If your request is not granted, SARS may not institute sequestration or liquidation steps to collect the tax until the dispute is finalised.
- Clarifies when and how you can pay off in instalments the tax you owe.
- Limits the power to impose additional tax to behaviours and circumstances listed in the bill, as opposed to the current open-ended discretion to impose up to 200 percent additional tax.