Prof Daniel N Erasmus
“How to survive a tax audit” under the new Tax Administration Act, 2011
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More Info – http://www.iitf.net More notes & Advanced
Diploma In Tax Procedural Law
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http://www.TaxRadar.net - client funding
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Prof D N Erasmus –
daniel@TaxRiskManagement.com
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http://www.ErasmusOnTax.com
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List of cases
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BALANCE BETWEEN SARS’ POWERS & TAXPAYER RIGHTS
TAA seeks to achieve a balance between powers & duties of SARS
and rights & obligations of taxpayers thereby enhancing equity and
fairness of tax administration
SARS
TAXPAYERS
Powers
&
Duties
Rights
&
Obligations
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General observations
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Introduction - survey
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An approach to Tax Risk Management
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SARS officials – Relationship Managers
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International Ethics Standards Board for Accountants
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Specific provisions in the TAA relevant to audits
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Audit Commencement & SARS response
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Key Constitution provisions
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S 1(c) Principle of Legality; S 2; S 33; S 35(3)(j); PAJA – “administrative action” & S6(2) ; S 195
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S 172; S 237; S 4(2) of SARS Act
Tax Court or High Court
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DESIGN OF TAA: MAIN CHAPTERS - HIGHLIGHTS
DESIGN OF TAB: MAIN CHAPTERS
Chapter 1
Definitions
Chapter 11
Recovery of Taxes
Chapter 2
General Administration
Chapter 12
Interest
Chapter 3
Registration
Chapter 13
Refunds
Chapter 4
Returns and records Chapter
Chapter 14
Write-off or Compromise of tax debt
Chapter 5
Information Gathering
Chapter 15
Non Compliance
Chapter 6
Confidentiality of information
Chapter 16
Understatement penalty
Chapter 7
Advance Rulings
Chapter 17
Criminal Offence
Chapter 8
Assessment Chapter
Chapter 18
Reporting of unprofessional conduct
Chapter 9
Dispute Resolution
Chapter 19
General Provisions
Chapter 10
Tax Liability & Payment
Chapter 20
Transitional Provisions
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TAA: BALANCE BETWEEN POWERS & RIGHTS (1)
INFORMATION GATHERING & ENFORCEMENT
SARS POWERS
Information gathering
Inspection at premises without prior notice
Request for information: Any‘relevant
material’ re identifiable taxpayers & group of
taxpayers
Taxpayers Rights
Limitation on information (only if relevant to tax Act)
Protection of right against self-incrimination
PAJA & Secrecy to protect privacy rights
SARS Administrative Complaint Resolution
Tax Ombud / Public Protector / Courts
Limited grounds (e.g. identity of occupant)
Private dwelling – occupant must give consent
Reasonable specificity of request
Limited to records reasonably maintained
Interview at SARS office & production of
relevant material
Time extension must be considered
Just cause basis for refusal
Only if intended to clarify issues of concern &render
audit unnecessary
Reasonable specificity of request
Field audit or criminal investigations
Prior Notice of at least 10 days & taxpayer may
request different date
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TAA: BALANCE BETWEEN POWERS & RIGHTS (2)
INFORMATION GATHERING & ENFORCEMENT (cont.)
SARS
TAXPAYER RIGHTS
POWERS
Audit
Audit selection on rational basis (random or risk)
Only authorised SARS officials may audit & must produce authorisation
Audit reports on stage of completion to taxpayer
Notice of inconclusive audit to taxpayer
Letter of audit findings to taxpayer
Taxpayer may respond to findings prior to assessment
Criminal
Investigations
Separation between audit and criminal investigation
Only authorised SARS officials may investigate
Criminal investigation: Adherence to rights as suspect
Taxpayer must be informed of inconclusive investigation
Only senior SARS official may lay complaint with NPA
Inquiry
Authorised by Judge of High Court upon application
Independent oversight of inquiry
Confidential & protection against incriminating evidence
Search &
Warrant: Issued by Magistrate/Judge of High Court upon application
seizure
Warrantless: Narrow circumstances
Carrying out: Decency & Order; Inventory; Copies/originals;
Protection of privileged documents; Application for return/damages
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TAA: BALANCE BETWEEN POWERS & RIGHTS (3)
SARS POWERS
Recovery
Debt relief
Personal liability
Repatriation of
foreign assets
Preservation of
assets
RECOVERY
TAXPAYER RIGHTS
Statutory limitations (e.g. TAB; Insolvency Act; Companies Act)
Period of limitations reduced to 15 years
Constitutional limitations (PAJA, property rights etc.)
SARS Administrative Complaint Resolution / Tax Ombud /
Public Protector / Court review
Civil procedural rights (e.g. Rescission of judgments)
Deferment by instalment payment agreements
Write off or compromise agreements
Suspension pending outcome of dispute
Remittance of penalties and interest
Voluntary Disclosure Programme - penalty relief
Prescribed criteria in TAB before 3rd party will be held liable
Normal court remedies during recovery
Prescribed judicial procedure before Judge of High Court
Prescribed judicial procedure before Judge of High Court
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QUESTIONS
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Address questions to:
Prof D N Erasmus [daniel@TaxRiskManagement.com]
083 458 8422
www.ErasmusOnTax.com
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Thank You
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1.Republic of South Africa
The Republic of South Africa is one, sovereign, democratic state founded on the
following values:
(a)Human dignity, the achievement of equality and the advancement of
human rights and freedoms.
(b)Non-racialism and non-sexism.
(c)Supremacy of the constitution and the rule of law.
(d)Universal adult suffrage, a national common voters roll, regular elections
and a multi-party system of democratic government, to ensure
accountability, responsiveness and openness.
2.Supremacy of Constitution
This Constitution is the supreme law of the Republic; law or conduct
inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.
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237. Diligent performance of obligations
All constitutional obligations must be performed diligently and without delay.
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195. Basic values and principles governing public administration
Public administration must be governed by the democratic values and principles
enshrined in the Constitution, including the following principles:
(a) A high standard of professional ethics must be promoted and
maintained.
(b) Efficient, economic and effective use of resources must be promoted.
(c) Public administration must be development-oriented.
(d) Services must be provided impartially, fairly, equitably and without bias.
(e) People's needs must be responded to, and the public must be
encouraged to participate in policy-making.
(f) Public administration must be accountable.
(g) Transparency must be fostered by providing the public with timely,
accessible and accurate information…
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1.Republic of South Africa
The Republic of South Africa is one, sovereign, democratic state founded on the
following values:
(a)Human dignity, the achievement of equality and the advancement of
human rights and freedoms.
(b)Non-racialism and non-sexism.
(c)Supremacy of the constitution and the rule of law.
(d)Universal adult suffrage, a national common voters roll, regular elections
and a multi-party system of democratic government, to ensure
accountability, responsiveness and openness.
2.Supremacy of Constitution
This Constitution is the supreme law of the Republic; law or conduct
inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.
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SARS Act 34 of 1997
4 (2) SARS must perform its functions in the most and effective manner and in
accordance with the values and principles mentioned in section 195 of the
Constitution.
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