30 September 2011

Tax Administration Bill: SARS responds to public comments

The Tax Administration Bill, No 11 of 2011, (the Bill) has been subject to an extensive process involving participation by the public and it is currently in its second draft.

Recently, SARS released a comprehensive response document in relation to some of the latest public submissions. SARS clarified its position on some of the more controversial issues surrounding the Bill.

Extension of legal professional privilege to accountants

It was suggested that the Bill should extend legal professional privilege to all tax practitioners, including non-lawyer tax practitioners such as accountants. SARS's view on the issue is that the matter should rather be dealt with in the soon to be introduced Regulation of Tax Practitioners Bill. Its main reason for this is that non-lawyer tax practitioners such as accountants are not currently regulated to the same degree as legal professionals. Admitted attorneys and advocates have certain duties as officers of the Court that accountants do not have. Accordingly, and in order to prevent a flare-up in "rogue practitioners" who might abuse such privilege, SARS is of the view that a final decision should only be taken once all tax practitioners are regulated in a way similar to lawyers.

Search and seizure without a warrant

Besides various clauses in the Bill dealing with search and seizure operations by SARS where a warrant has been obtained, and who may conduct such operations and where, the Bill also deals with the situation where a search and seizure operation can be conducted by SARS without a warrant. Comments included that the Bill leaves the decision to search and seize without a warrant in the subjective discretion of a SARS official and does not set out objective criteria for when a search and seizure without a warrant may be justified. Also, where the need exists, warrants can be obtained rather speedily, and thus there is no real need for these provisions. Some also called for an after-the-fact validation of the search and seizure by a Court.

SARS took the view that there is a real need for the power to search and seize without a warrant, even though it may only apply to a small number of cases where time is of the essence. SARS noted the call for various checks and balances to be introduced, but SARS relied on the legal opinion of two Constitutional Law experts that it had engaged who were of the view that no additional checks and balances are required. SARS also commented that an after-the-fact validation mechanism is not necessary because an aggrieved taxpayer can immediately after the search apply to court for a review of the decision by SARS, which is an administrative decision and has to comply with the requirements of fair administrative action.

The Tax Ombud

Some concerns were raised in respect of the independence, mandate and powers of the Tax Ombud.

The Bill provides that the Tax Ombud is appointed by and reports directly to the Minister of Finance, but that the staff in the office of the Tax Ombud will be employed by SARS and the office will be funded by SARS. SARS's view is that staff will be sourced from SARS and the office of the Tax Ombud funded by SARS for practical reasons. It would be better to employ someone in the office of the Tax Ombud who is familiar with the internal processes of SARS. SARS did however concede that the Tax Ombud should have a greater say in who is appointed to his or her office and it should not be left to the Commissioner to drive the process.

There was some concern as to whether the Tax Ombud would have the power to review faulty procedures, unfair treatment and bias or prejudice on the side of SARS. SARS clarified the situation by responding that the mandate of the Tax Ombud is wide enough to include these issues.

A more pressing issue was whether the Tax Ombud should be given sufficient power to order SARS to act in a certain way, affording relief to a taxpayer. This would include the power to order SARS to pay the costs of a taxpayer where SARS acted contrary to the obligation imposed on them. SARS rejected these suggestions by saying that the purpose of the Tax Ombud was not to interpose a quasi-judicial authority between the parties and the Court and therefore the Tax Ombud should not be a binding authority. The Tax Ombud, according to SARS, plays a facilitation role between the parties (such as mediation or conciliation), and its power lies in its duty to report to the Minister of Finance on any issues of concern. SARS suggested that the report by the Tax Ombud must include "identified systemic and emerging issues". SARS also recommended that the Tax Ombud's report should be tabled in Parliament by the Minister of Finance.

Heinrich Louw

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