Tax Administration Act 2013 Update
Prof Daniel N Erasmus
www.ErasmusOnTax.com
I. Prof. Daniel N. Erasmus
II. 083-4588422
III. Additional updated notes
IV. SAIT MOI and Proxy
INDEX PART A
I. Recent key updates & issues and per the brochure
II. Search & Seizure - Case Study
III. Preservation Order – Case Study
IV. Other emerging issues
Retired Judge Bernard Goepe
I. RECENT KEY UPDATES
• Important issues indentified by SAIT:
• Definitions - key definitions, such as relevant material,
administration of tax Acts – requirement of registration of
a company representative taxpayer
• What are SARS’ obligations in practice? A summary of
what SARS’ obligations are in each step of the process
(jurisdictional facts s3(2), letter of findings, request for
reasons, objection, appeal etc)
• Information gathering, audits, relevant material, letter of
findings, criminal investigations – things like the PAYE
questionnaire issued by SARS recently and Taxpayers’
rights at the commencement of an audit and the Issues
with tax clearance certificates (TCC obtained in 2012, but
denied in 2013 due to amounts outstanding in previous
years – going back even further than 5 year ago)
• ‘Just cause’ defence
• General administration provisions - conflicts of interest by
SARS, Tax Ombudsman, powers
I. RECENT KEY UPDATES
• Assessments - New rules on onus of proof, jeopardy
assessments
• Reduction in Chapter 16 Understatement Penalties, and
generally, Administrative Non-Compliance Penalties - fixed
amount penalties, % based penalties, remedies and can
taxpayers object;
• Tax Practitioner Provisions;
• Dispute resolution issues:
• Notifying SARS 72 hours before instituting action at head
office;
• Recent objection and other Dispute Rules amendments,
including pitfalls when lodging objections and appeals –
The new proposed rules and use of test cases. SARS
attempt in practice to curtail the 3 year prescription
period SARS appears to also disallow an objection without
first asking for additional information that could have
avoided an appeal and doesn’t stick to the time periods in
the TAA.
I. RECENT KEY UPDATES
• Other emerging issues:
• Dispute Resolution - When can you approach the High
Court directly, burden of proof
• Tax Liability and Payment - personal liability, instalment
payment agreements – the request for suspension should
be discussed
• Rescue provisions under the new Companies Act &
Recovery of Tax - liability of shareholders for tax debts
• Write off or Compromise of Tax Debts - typical procedure
& liability of shareholders for the tax debts of a company
• Voluntary Disclosure Programme – its effect on the
understatement penalties
I. SA & AFRICA CASE LAW
• Retrospective Tax Act ultra vires, aritrary & capricious –
International Financial Services v Mauritius Revenue Authority
• Judicial review in high court not tax court – Republic v C o T
ex parte SDV Transami (Kenya)
• Income Tax Case No 1866 75 SATC 268
• MTN INTERNATIONAL (MAURITIUS) LTD v COMMISSIONER
FOR SOUTH AFRICAN REVENUE SERVICE 75 SATC 171
• Review retrospective VAT regulations – Republic v M o F
(Kenya)
• Review assessment not via tax court – Republic v C o I ex
parte National Employers Mutual General Insurance
Association Ltd (Ghana)
I. SA CASE LAW
• Administrative Action – Mazibuko v City of Jhb ; Viking Pony v
Hidro-Tech Systems
• Lawfulness – HOSA v Minister of Health
• Procedural/Substantive fairness – substantive legitimate
expectation – Quinella Trading v M o Rural Develpoment
• Exercising a discretion – Ulde v M o Home Affairs
• Right to Reasons – Wessels v M o Justice
• PAIA – President v M & G Media
II. SEARCH & SEIZURE CASE STUDY
Be present;
Obtain clear Power of Attorney;
Check SARS authority;
Ensure SARS communicates only through your office;
Be present at the opening of documents;
Ensure compulsion by SARS – dangers of giving info unless
under compulsion;
• Monitor when SARS notifies about a parallel criminal
investigation;
• Constitution and conduct by SARS;
•
•
•
•
•
•
III. PRESERVATION ORDER CASE
STUDY
• Check SARS authority;
• Review the meaning of section 163 of Tax Administration Act
28 of 2011;
• Are the provisions constitutional? Proposed amendments
being considered
• The practical effect of what happens when such an order is
obtained?
IV. OTHER EMERGING ISSUES
• Failure by SARS to issue Letters of Findings eg. Where the
taxpayer has not agreed to an extension of time periods;
• Chapter 16 Understatement penalties and “…where the prejudice
to SARS or the fiscus …for the relevant period…”
• Prejudice
• Fiscus?
• Relevant period
INDEX PART B
I. Return preparer penalties
II. Professional responsibilities
III. Unauthorised practice of law
IV. Analysis of certain areas of tax practice
i.Criminal investigations
a. Criminal tax problems
b. Tax professionals role in criminal investigations
ii.Representing non-filers
V. General business advice to clients
VI. Malpractice considerations
I. RETURN PREPARER PENALTIES
• Power of Attorney
• Section 67 is a general prohibition of disclosure of taxpayer
information by SARS officials and to overcome this obstacle
and to overcome this taxpayers must properly authorise
their taxpayer representatives by a Power of Attorney
• Section 67(3) that in the event of disclosure of taxpayer
information ... the person to whom the disclosure was made
may not be published, disclosed or made known to any
other person who is not a SARS official
• Criminal sanction – section 236 fine or imprisonment not
exceeding 2 years
• Section 28 statement concerning accounts – SARS will
require a person who submits financial statements or
accounts prepared by another person, in support of that
persons submitted return, to submit a certificate or
statement
• Prevention and Combating of Corruption Act 28 of 2004 – s3
Return Preparer Penalties &
Issues Continued …
• Section 234 on criminal offences states a person who wilfully and
without just cause:
• (f) submits a false certificate or statement under chapter 4; or
• (j) fails or neglects to disclose to SARS any material facts
which should have been disclosed under the Tax
Administration Act
• (k) obstructs or hinders a SARS official in the discharge of the
official’s duties
• (l) is guilty of an offence and upon conviction is subject to a
fine or imprisonment for a period not exceeding two years
• Prevention and Combating of Corruption Act 28 of 2004 – s3
Return Preparer Penalties &
Issues Continued …
• Section 235 on criminal offences states that person who with
intent to evade or to assist another person to evade tax or to
obtain an undue refund under a tax act
• (a) makes or causes or allows to be made any false statement
or entry on a return or any other document, or signs a
statement, return or other document so submitted without
reasonable grounds for believing the same to be true
• (c) prepares, maintains or authorises the preparation or
maintenance of false books of account or other records or
falsifies or authorises the falsification of books of account or
other records
is guilty of an offence and, upon conviction, is subject to a fine or
to imprisonment for a period not exceeding five years.
• Section 235 is subject to the defence that the person proves that
there is a reasonable possibility that he or she was ignorant of the
falsity of the statement and the ignorance was not due to
negligence
Return Preparer Penalties &
Issues Continued …
• Chapter 15 Non-Administrative Compliance Penalties
• Chapter 16 Understatement Penalties
• Please refer to the Malpractice Liability section
Return Preparer Penalties &
Issues Continued …
STANDARDS OF CONDUCT
• Analyse facts and authorities and reasonably conclude there is
substantial authority
• Good faith reliance
• Good faith without verification on information furnished by
taxpayer – beware
• May not rely on information provided by taxpayer as to legal
conclusions about tax issues
• Relying in good faith and without verification in information
furnished by another adviser, another tax return preparer, or
another party from within the tax return preparers firm or from
outside the tax return preparers firm – beware of Section 28
• Must make appropriate enquiries to determine the existence of
facts and circumstances required as a condition of claiming any
deduction or credit
Return Preparer Penalties &
Issues Continued …
STANDARDS OF CONDUCT
• May rely in good faith and without verification (but with
extreme caution) on a tax return that has previously been
prepared by a taxpayer or another tax return preparer and filed
with SARS (unless glaring mistake is discovered)
• May not ignore the implications of information furnished to, or
actually known by the tax preparer must make reasonable
enquiries if the information appears to be incorrect or
incomplete. The tax preparer is not considered to have relied
in good faith if the advice or information is unreasonable on its
face value and the tax return preparer knew or should have
known that the party providing the advice or information was
not aware of all relevant facts, or that they were no longer
reliable due to relevance in the law since the time the advice
was given
II. PROFESSIONAL RESPONSIBILITIES
BEST PRACTICES FOR TAX ADVISORS
• Tax advisors should provide clients with the highest quality
representation concerning tax issues by adhering to best
practices in providing advice in preparing or assisting in the
preparation of a submission to SARS. Best practices include the
following:
• Communicating clearly with the client regarding the terms of
engagement
• Establishing the facts
• Advising the client regarding the import of the conclusions
reached and to advise the client of the potential of penalties
and criminal offences
• Acting fairly and with integrity in any practice before SARS
Professional Responsibilities cont…
PROCEDURES TO ENSURE BEST PRACTICES FOR TAX
ADVISORS
• Tax advisors with responsibility for overseeing a firm’s practice
of providing advice concerning tax issues or of preparing or
assisting in the preparation of submissions to SARS for all
members, associates, and employees are consistent with the
best practices set out above
Professional Responsibilities cont…
STANDARDS WITH RESPECT TO TAX RETURNS AND
DOCUMENTS, SUBMISSIONS AND OTHER
DOCUMENTS/PAPERS
• A practitioner may not wilfully, recklessly, or through
negligence do anything that contravenes the criminal offence
provisions of Sections 234, 235, 236 and 237 as set out above
• A practitioner should not advise a client to take a position on a
document, affidavit or other paper submitted to SARS unless
the position is not frivolous
• A practitioner should not advise a client to submit a document,
affidavit or other paper to SARS which is designed to delay or
impede the administration of any tax act
• Prevention and Combating of Corruption Act 28 of 2004 – s3
Professional Responsibilities cont…
STANDARDS WITH RESPECT TO TAX RETURNS AND
DOCUMENTS, SUBMISSIONS AND OTHER
DOCUMENTS/PAPERS continued
• A practitioner should not advise a client to submit a document,
affidavit or other paper to SARS that contains or omits
information in a manner that demonstrates an intentional
disregard of a rule or regulation, unless the practitioner also
advises the client to submit a document that evidences a good
faith or just cause challenge to the rule or regulation
• Again please take note of the criminal offence provisions in
Section 234, 235, 236 and 237 in this regard
• Also take care of the Chapter 16 Understatement Penalty and
in particular the table set out in Section 233, which increases
the percentage penalty if the taxpayer has been “obstructive”
Professional Responsibilities cont…
REQUIREMENTS FOR OTHER WRITTEN ADVICE
• Take careful note of the provisions of Section 223(3) where
SARS must remit a penalty imposed for a substantial
understatement, if SARS is satisfied that the appropriate
timely written advice was obtained by the taxpayer from a
registered independent tax practitioner
• The advice must be based on full disclosure of all specific facts
and circumstances in respect of the particular transaction and
any related transactions to that transaction which may have an
anti-avoidance or substance over form issue whether or not
the taxpayer in question was a direct party to all these steps
or parts of the totally of transactions effecting the one that is
the subject of the advice.
Professional Responsibilities cont…
KNOWLEDGE OF CLIENT’S ADMISSIONS
• A tax practitioner who, having been retained by a client with
respect to a matter administered by SARS, knows that the
client is not compliant with the tax laws or has made an error
in or omission from any return, affidavit, document or any
other paper which the client submitted or executed under the
tax laws, must advise the client properly on the fact of such
non-compliance, error or omission. The tax practitioner must
advise the client of the consequences as provided under the
Tax Administration Act and other Tax Acts of such noncompliance, error or omission.
Professional Responsibilities cont…
SAIT/OTHER PROFESSIONAL BODIES CODE OF CONDUCT
AND SARS LODGING COMPLAINTS
Complaint by SARS to ‘controlling body’ s 241;
What if SARS are not acting impartially?
What if the ‘controlling body’ is not acting impartially?
Defences available to tax practitioners:
• Just cause
• Lack of wilfilness
• Negligence?
• FOR EXAMPLE:
• New proposed MOI for SAIT
• Code of Conduct – April 2009
•
•
•
•
III. UNAUTHORISED PRACTICE OF
LAW
For example, giving tax advice involved in the preparation of a
tax return can be distinguished from giving the same tax advice
outside of the scope of preparing a tax return where other legal
issues are at play.
A non-lawyer could perform any “legal task” as long as it involves
knowledge possessed by any ordinary lay person. This standard,
however, would hardly meet the preparation of tax returns where
the tax practitioner who is not a lawyer, must be careful is in
relation to the interpretation of issues and documents that may
lead to litigation which would include the interpretation of legal
issues that are not necessarily tax issues.
Unauthorised Practice of Law Cont…
The reason for bringing this to your attention is that should a
malpractice suite be instituted against you and you are found to
have given advice in an area that you are not qualified to do so
(such as in respect of other legal issues that are closely aligned with
the tax issues under consideration) you may be held to have acted
in a negligent manner, which would expose you to a malpractice
liability suite.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE
Criminal Investigations
Tax practitioners who are not attorneys cannot rely in any manner
whatsoever on the attorney/client privilege.
This means that if you have a number of conversations with your
taxpayer client at a time when you represented the client in a
regular audit and that audit has been referred to criminal
investigations, all these conversations are not subject to
attorney/client privilege and you will be required to disclose them if
you are called as a witness to any criminal prosecution against your
client.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
a. Criminal tax problem
A tax return preparer has prepared Mr Goodheart’s return for 20 years and
he knows that he is a regular church goer, teacher of Sunday school and a
deacon at the church. To the tax return preparer’s best knowledge Mr
Goodheart has never told a lie and his reputation in the community for truth
and veracity is exceptional. Mr Goodheart comes home one day and finds
the business card of a SARS investigator with a note attached to his door
saying, “please call me”. Mr Goodheart immediately calls you proclaiming his
innocence and says he does not know what this is about and asks you to
contact the SARS investigator. How should you proceed with this
instruction?
• Discuss this amongst your group
• Pay attention to what type of audit this may be
• What information do you have?
• What communication should you enter into with the SARS official?
• What information should you be obtaining from your client?
• What other representation should you put into play early on in this
matter?
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations
• The area of representing a taxpayer under investigation by SARS
in the criminal investigation division of SARS is unique. It not
only encompasses a knowledge of tax law but bears on other
areas of practice unique to lawyers. This includes issues of
criminal law, constitutional law and the law of evidence. Principal
amongst these are the constitutional rights of an accused person
as set out in Section 35 of the Constitution and the
attorney/client privilege. There are also areas of conflict of
interest that may come into play, especially where you have acted
as tax return preparer and advisor to your client and the
possibility exists that you may be called as witness against your
client, because you are not an attorney.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
• One of the most difficult areas of practice for tax practitioners is to
discover that his client may have a criminal tax problem. Once
the tax practitioner suspects that there may be an alleged or other
transgression which carries a criminal offence, the tax practitioner
should advise his client to discuss the matter with a qualified tax
attorney. The principle reason for this is that the tax practitioner
does not have any legal privilege which would prohibit his
testimony of such conversations in any criminal tax investigation
or subsequent criminal proceedings. For a tax practitioner to seek
out explanations of the possible fraud areas would be to educate
the tax practitioner in becoming a potential witness against his
client, which he would want to avoid at all costs.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
• Furthermore, if the tax practitioner becomes aware of the practice
or problem area, the tax practitioner is faced with a decision of
what to do next. If the tax practitioner continues with the practice
on behalf of the client, the tax practitioner becomes a conspirator,
or aid and abettor who will also face criminal prosecution. A tax
practitioner cannot close his or her eyes to obvious facts at that
point of time and proceed to represent a client with knowledge of
a problem area. The best protection for the tax practitioner and
the most professional way to represent the taxpayer client is to
refer the matter to a competent tax attorney for advice and to
take the matter further, where that attorney can then bring the
tax practitioner under his or her wing and proceed with the matter.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
• Some of the following issues should be carefully considered:
• If a SARS investigator should want to interview the client and
the tax practitioner, nothing should be discussed with that
person without the tax attorney having been instructed and
having been asked to be present;
• The taxpayer’s records in the hands of the tax practitioner
would have to be produced if SARS requires production of
those records, thus not only will the tax practitioner be
required to produce his or her own working papers and
materials relating to the preparation of the taxpayer returns,
but he or she will also be required to produce any records of
the taxpayer which is in his or her possession;
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
• SARS will attempt to use the preparer to transfer responsibility
to the taxpayer for the underlying information used in
preparing the return. Similarly, SARS will seek to prove that
any income or other material information not appearing on the
return was not disclosed to the preparer. “Did you have any
other income?” is the first expected question of a tax return
preparer and becomes the double-edge sword proving
understatement, concealment and wilfulness by the taxpayer.
In asking this question, SARS hopes to remove any attempt of
the defence of mutual mistake, confusion, negligence on
behalf of the taxpayer or other related defences. So right
from inception of such an investigation it becomes a slippery
downward slope, which is why proper tax attorney, counsel
and representation is required from inception where any type
of criminal offence may be contemplated.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
• When the taxpayer receives a notice of an audit, the tax
practitioner should prepare the taxpayer’s records for
production and review them in such a way to determine any
possible problem areas. If a potential fraud issue should
become known prior to the inception of the audit, again the
tax return preparer should advise the client and recommend
consultation with a tax attorney. To proceed with an audit at
this time runs a very substantial risk that documents will be
disclosed or representations could be made that are inaccurate
thereby prompting further enquiry by SARS and possible fraud
referral of the taxpayer and/or the tax return preparer as well.
Furthermore if some answers are given and then the SARS
assessor makes certain enquiries and no answer can be given
after the attempt to circumvent the issue, the SARS official’s
suspicion will be greatly enhanced increasing the likelihood of
a fraud or criminal investigation referral.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
•
With respect to the production of documents, the preparer and
accounting records are not subject to any privilege. Initially the
accounting records themselves would have to be produced. However,
one should always consider that the defence of self incrimination and
being prevented from self incriminating oneself in terms of the
Constitution is available. How this plays out with the interaction with
SARS is very tricky and is something that should be handled by the
appropriate tax attorney. In this instance, it may be necessary for
both the taxpayer and the tax return preparer to be represented by
the tax attorney so that, to the extent that what one establishes, a
fraud may have taken place, that the appropriate defences and
strategy can then be worked out. It should be remembered that the
work papers in the hands of the tax return preparer do not belong to
the taxpayer, but are those of the tax return preparers. If there is a
possibility that the tax return preparer may be implicated in any fraud
charge against the taxpayer, it would be necessary for the tax return
preparer to retain the services of a tax attorney to protect his or her
constitutional rights.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
b. Tax practitioners role in criminal tax investigations cont…
• The tax return preparer can greatly assist the taxpayer’s
attorney, not only with respect to past investigative facts, but
with respect to analysing SARS current case and defences.
IV. ANALYSIS OF CERTAIN AREAS
OF TAX PRACTICE CONTINUED
ii.Representing non-filers
• A tax practitioner is authorised to represent non-filers and in this
regard would typically take advantage of the voluntary disclosure
programme set out in Sections 225 to 233 of the Tax
Administration Act
• However, a non-filer who has been contacted by the Special
Investigations Branch of the Criminal Investigation Division of
SARS should be referred to a tax attorney, who in turn can then
instruct you to assist in any preparation of tax returns in
proceeding with this matter
V. GENERAL BUSINESS ADVICE TO
CLIENTS
• The further the tax practitioner veers from the area of tax advice
into the more general area of business advice, the more likely
unauthorised practice of law may become an issue;
• To avoid the possibility of being held to a higher duty, a tax
practitioner must take great care in determining that the financial
advice given is known to the ordinary person and in the realm of
the general community;
• Always be careful of the potential legal determinations, which
must come from an attorney;
• Also you must be aware that some of your actions could prompt
malpractice and other civil liabilities;
VI. MALPRACTICE CONSIDERATIONS
• There are three considerations in this area:
• To whom is a duty of care owed?
• A level of competence and diligence required
• Damages
• In certain instances you may have a duty of care beyond your
client. For example, if you prepare your clients books and records
and know the statements will be furnished to a lender who will
rely on the substance of the statements you prepared and that
lender has contacts with you regarding the accuracy of the
statements, in certain instances you may have an exposure to the
lender should the loan default. In this regard, you should pay
particular attention to Section 28 of the Tax Administration Act in
respect of your responsibility towards SARS in preparing any
books and records and financial statements. In preparing any
such financial statements you should put on the cover sheet of
the statement prepared by you that these are compilations only
based on information provided by the client and not intended for
any third party reliance.
VI. MALPRACTICE CONSIDERATIONS
CONTINUED
• If you act like a lawyer, a tax advisor, business planner,
investment advisor and estate planner etc. you may be held to
that standard. You may not be able to defend on the theory
that you are only a tax practitioner who prepares tax returns
• Usually a complaining party is entitled to recover damages
which have been approximately caused by a defendant’s
negligence or conduct. In essence, to determine your exposure
compare the plaintiff’s current position with what it would have
been had you not acted in a negligent manner
• A common malpractice area would be in the area of tax return
preparation involving a tax practitioner failing to file a client’s
tax return on a timeously basis. If the return was filed late
because of the practitioner’s fault, the taxpayer may recover
any interest and penalties assessed by SARS for late filing. Also
possible are the recovery of legal and accounting fees expended
in an effort to avoid payment of the late filing charges.
VI. MALPRACTICE CONSIDERATIONS
CONTINUED
• Malpractice insurance should be something that is in play in
order to cover any type of exposure as set out above
• Tax insurance for the client should also be considered to assist
the client in any representation for the client before SARS
INDEX PART C
I. Advanced Examinations by SARS
II. Case Study
III. Case Study - DISCUSSION
IV. Correcting problems of clients
V. Correcting problems of clients – Case Study
VI. Eggshell Audits
VII.Referral of Criminal Cases
I. ADVANCED EXAMINATIONS BY
SARS
• A lengthy request for generic information and multiple
documents usually accompanies many initail audit notices;
• Assessors may also provide a statement of mutual audit
expectations as part of the audit notification;
• Assessors also warn that if relevant material is not provided
timeously, it is a criminal offence if there is no just cause, and
an obstruction for Chapter 16 Understatement Penlaties;
• A pre- audit engagement letter/meeting/telephone call may
be beneficial in discovering and streallining potential audit
issues – incl. determining the precise nature, scope & extent
of the audit, and on what risk assessment factors SARS is
basing the audit on. This will assist in creating and
maintaining a professional objective atmosphere;
• To initiate the audit, SARS do not need to secure judicial
permission, but they must act intra vires the Tax
Administration Act 28 of 2011 – what are the key provisions
they must adhere to?
I. ADVANCED EXAMINATIONS BY
SARS CONTINUED
• What about adherence by SARS to strict evidentiary rules &
procedures – compare to § 7602 in the US?
• Proper planning and preparation of the taxpayer is critical at
the outset, especially if Voluntary Disclosure Program
opportunities are identified – lookat the columns in the
Chapter 16 Understatement Penalties;
• Each issue that may be raised by SARS must be capable of
being accurately substantiated with supporting documentation
and legal tax principles;
• Supporting documents should be verified;
• Successful representations take place when representatives
“humanize” the audit process – establishing a friendly, nonhostile environment. This will help to accelerate resolution;
• Responses should be made in a timely manner – but without
compromising the rights of taxpayers;
• Always be available to discuss any emerging issues in the
audit, so as to clarify any concerns of the assessors – in this
regard regular follow up meetings are advisable.
II. CASE STUDY
• Johnny and Jenny – husband and wife;
• Notification of audit;
• Horse breeding as a farming venture – various deductions
questioned;
• The facts – to be read;
III. CASE STUDY - DISCUSSION
• What are the first steps to take when audit notification
arrives?
• What issues require research before you meet with the
clients? Procedural issues? Issues of Law? Ethical issues?
• What items do you place on the agenda for the meeting with
your taxpayer clients?
• The assessors want your clients present at the first meeting
with them? What do you do and how do you prepare them?
• SARS asks for a download of your clients QUICKBOOKS or
PASTEL backup for the years they are investigating. What do
you do?
• Do you request a copy of SARS’ internal risk assessment
factors for horse-breeding farming tax issues?
• After the initial interview – the assessor appears not
convinced that clients were conducting a trade for the
production of income. What now?
IV. CORRECTING PROBLEMS OF
CLIENTS
• Are there any additional facts you deem critical to your
knowledge before you would consider suggesting a resolution
to the client’s problem?
• What additional information would you request?
• Do you trust your client?
• What other sources of necessary factual information would
you seek out or request?
• Define the issues which the client must likely face to resolve
the dilemma;
• What potential issues or procedures could be raised by SARS?
• What alternative proposals potentially are available to this
client?
• Does the client have any penalty exposure?
• What ethical issues, if any, would you consider before
accepting this client or implementing your plan?
V. CORRECTING PROBLEMS OF
CLIENTS – CASE STUDY PROBLEMS
• PROBLEM 1 –
• PROBLEM 2 –
• PROBLEM 3 –
officers;
• PROBLEM 4 –
& penalties;
3 part rental of properties problem;
Previously file tax return now lost;
Non payment of PAYE claims against Co.
Arrear PAYE and payment plan to SARS for tax
VI. EGGSHELL AUDITS
• What is an eggshell audit? A civil audit where you are aware
there is a tax fraud;
• What is your first step?
• Objecives in dealing with the assessors;
• How to handle a parallel civil and criminal audit?
• The key Tax Administration Act 28 of 2011 provisions:
• S 43 and 44
• S 46
• S 72
• Constitutional provisions s 35
• Ferreira v Levin
• Rex v Jarvis
VII. REFERRAL OF CRIMINAL CASES
Without just cause – defence;
Wilfulness – intent;
Reverse onus?
Other issues?
Criminal provisions in the Tax Administration Act 28 of 2011:
• Chapter 17
• Common law crimes
• Constitutional guarantees
• Double-jeopardy
•
•
•
•
•
Prof D N Erasmus
Tel: 083 458 8422
E-mail: erasmud@tjsl.edu
E-mail: daniel@taxriskmanagement.com