The Tax Administration Bill, No 11 of 2011, was promulgated on 4th July 2012 in Government Gazette No 35491. In accordance with section 272 of the Tax Administration Act, the Act shall come into operation on a date to be determined by the President by proclamation in the Gazette. It must be pointed out that the date on which the Act will come into operation has not yet been proclaimed in the Gazette. Furthermore, section 272(2) of the Act provides that the President may determine different dates on which different provisions of the Act come into operation.
Paragraph 78 of schedule 1 to the Tax Administration Act is deemed to have come into operation on 1st January 2011 and applies in respect of premiums incurred on or after that date. This amendment relates to premiums paid by an employer for an employee regarding the loss of income arising as a result of illness, injury or disability and has the result that such premiums may be deducted from remuneration paid by the employer in determining the amount of PAYE or Employees' Tax which is payable.
Furthermore, paragraph 184 of schedule 1 of the Tax Administration Act is deemed to have come into operation on 1st March 2011 and applies in respect of a mineral resource transferred on or after 1st March 2010. That paragraph relates to section 4 of the Mineral and Petroleum Resources Royalty (Administration) Act, 2008. In addition, certain amendments made to section 66 of the Income Tax Act, No 58 of 1962, as amended, which section deals with a notice by the Commissioner requiring returns for assessment of taxes under the Act, and the manner in which those returns are to be furnished, came into operation on 1st April 2012, that is, the date on which Dividends Tax took effect.
Except for the above, none of the specific provisions contained in the Tax Administration Act have yet taken effect. The South African Revenue Service issued a media release on 5th July 2012, indicating that SARS' preparations for the implementation of the Tax Administration Act are at an advanced stage, and that it is anticipated that the Act will come into operation within the next three months.
The Tax Administration Act provides that the Tax Ombud must be appointed within a year from the date on which the Act takes effect. It must be noted that the Minister of Finance indicated in his 2012 budget speech that the Tax Ombud will be appointed during the course of 2012.
The purpose of enacting the Tax Administration Act is to harmonise the administrative provisions of all taxes, other than customs and excise in South Africa. The legislation creates a framework to facilitate greater access by SARS to third party data, to enhance SARS' initiatives regarding the pre-population of individual tax returns. Furthermore, the Act creates clarity on SARS' powers of gathering information, and allows for SARS to visit business premises without prior notice to establish if the premises are being used for purposes of conducting a business, and, more importantly, to establish whether that business is, in fact, registered for tax purposes.
The legislation allows for SARS to conduct a search and seizure operation without a warrant where it is anticipated that the time taken to secure a warrant would result in the destruction of the documents required by SARS. Clearly, on the one hand, SARS must administer the tax laws of South Africa and is entitled to obtain the information to meet its mandate. On the other hand, taxpayers are entitled to a right to privacy, as enshrined in the Constitution of the Republic of South Africa. There is, therefore, tension between the powers of SARS and the right of taxpayers to privacy. The power to conduct search and seizure operations without a warrant is controversial, and it is hoped that this power will only be used in those instances where it is warranted, and that it is not abused.
The legislation contains requirements and time frames for the issue of tax clearance certificates, which was not previously contained in the Income Tax Act.
Furthermore, SARS will, once the Tax Administration Act takes effect, be compelled to advise taxpayers as to the status of audits being undertaken on their affairs, which was previously not specifically required. The legislation contains a permanent voluntary disclosure program similar to that which commenced on 1st November 2010 and ended on 31st October 2011. It would appear that a number of taxpayers regret not having taken advantage of the voluntary disclosure program, and are currently awaiting the date on which the permanent voluntary disclosure program will take effect. Based on the media release published by SARS, it is anticipated that the new voluntary disclosure program should commence within three months.
On Friday 6th July 2012, National Treasury released various draft amendment bills, and, included in those, was the draft Taxation Administration Amendment Bill 2012, which already seeks to amend certain of the provisions contained in the Tax Administration Act. Some of those amendments are refining the definitions contained in that legislation and clarify certain provisions contained in the legislation. The draft Bill seeks to amend certain of the provisions regulating the issue of tax clearance certificates and provides that SARS may withdraw a tax clearance certificate with effect from the date on which the taxpayer no longer complies with their obligations under the fiscal statutes administered by the Commissioner. Previously, a tax clearance certificate could only be withdrawn from the date of issue thereof, where the certificate was issued in error or was obtained on the basis of fraud, misrepresentation or non-disclosure of material facts.
In addition, the draft Bill seeks to commence the process in regulating tax practitioners in South Africa. The explanatory memorandum on the Taxation Administration Amendment Bill indicates that it is proposed that the regulation of tax practitioners be divided into two distinct phases. The first phase will require all tax practitioners to register with a recognised controlling body. The second phase will entail the establishment of an independent regulatory board for tax practitioners, and will only commence after the first phase has run its course.
SARS will review the minimum qualifications and experience requirements, continuing professional education requirements, codes of ethics and conduct and disciplinary procedures of any professional association seeking recognition by SARS. Furthermore, SARS will ensure that members of the body concerned are required to have tax knowledge that is kept up to date and that the professional body has an effective disciplinary mechanism to discipline members who contravene the codes of ethics and conduct. The Bill proposes recognising statutory regulators automatically, whereas professional bodies would need to be recognised by SARS so long as those professional bodies are approved in terms of section 30B of the Income Tax Act for purposes of section 10(1)(d)(iv) of the Act.
The Bill proposes inserting section 241(2) into the Tax Administration Act, whereby a senior SARS official may lodge a complaint with a recognised controlling body if a registered tax practitioner has, in the opinion of the Commissioner, unreasonably delayed the finalisation of any matter before SARS, been grossly negligent with regard to any work performed as a registered tax practitioner, or has committed any one of the other defaults listed in the draft Bill. Thus, SARS wishes to be placed in a position that it can initiate disciplinary proceedings against a registered tax practitioner. Clearly this is necessary in order to protect the public where a registered tax practitioner fails to adhere to accepted levels of service that would be expected from a professional person. However, a question arises as to what taxpayers can do where a SARS official fails to finalise matters within a reasonable time, or acts negligently and causes undue costs to be incurred by the taxpayer. The taxpayer would, probably, be entitled to lodge a complaint with the Tax Ombud, once that office has been created, but it would be preferable if the legislation dealt with the levels of conduct taxpayers should be able to expect from SARS officials, and what recourse is available where such standards are not complied with, similar to those which SARS is seeking from registered tax practitioners.
The Tax Administration Act clarifies the legislation dealing with tax administration, by removing anomalies which existed in the various pieces of fiscal legislation. Thus, it is important that taxpayers, their advisors and the SARS undertake a study of the provisions of the Tax Administration Act, so that they become familiar therewith, as those provisions will affect the manner in which tax is administered in the future.
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