The Tax Administration Bill, which will establish a tax ombud and consolidate numerous administrative measures designed to ensure that taxpayers comply with the tax laws, was tabled in Parliament this week.
The bill, which has been published twice before in draft form, will replace the administrative measures in a number of tax Acts.
It gives additional rights to taxpayers, as well as greater powers to the South African Revenue Service (SARS) to ensure that it collects what taxpayers owe. The powers include collecting information from third parties and the ability to search for and seize documents where there is an immediate threat that these will be destroyed.
If the bill is enacted as proposed, among the measures that are likely to affect you are:
* The appointment of a tax ombud, who will report directly to the Minister of Finance and whose staff will be seconded from SARS. This is similar to the office of the Canadian Taxpayers’ Ombudsman.
The ombud will address your complaints about service or a procedural or administrative matter that arises from SARS’s application of a tax Act. Before you can complain to the tax ombud, you must have exhausted SARS’s complaint resolution mechanisms.
The memorandum to the bill says the ombud will not be able to review legislation, tax policy or SARS’s policy on determining tax liability.
Stiaan Klue, the chief executive of the South African Institute of Tax Practitioners, says that while the Tax Administration Bill is an excellent law that goes a long way to improve the morality and the rights of ordinary taxpayers, he is disappointed at the lack of technical competency requirements for the tax ombud. The bill requires only that the ombud “must have a good background in customer service, as well as tax law”.
Klue says it is imperative that the tax ombud is very competent in tax law to best discharge his or her duties, taking into consideration the technical minefield of taxation.
* The extension of SARS’s powers to obtain information about your assets and income from third parties, such as your bank, investment house or employer.
The bill proposes that SARS be able to list in a public notice the third-party returns it requires. These include information from an employer and a person who pays amounts to you, transacts with you or has control of any of your assets.
* Aligning across taxes of provisions for charging interest on the tax you owe, and introducing interest calculated on a compound basis. Interest is currently calculated on a simple basis. If the bill is enacted, interest will be calculated daily and compounded monthly.
* Mandatory ongoing penalties if you fail to comply with the administrative requirements of any of the tax laws. These penalties were introduced in March 2009 but only for certain failures. In addition, the bill does away with the discretion SARS has to impose additional tax of up to 200 percent of the tax you owe if you fail to declare the right amount of tax. This will be replaced with a table of penalty percentages that vary according to the seriousness of the matter and your behaviour.
* If you meet certain criteria, SARS will have to allow you to pay off the tax you owe, with interest, in instalments. Currently, SARS has the discretion to allow you to pay off income tax but not VAT.
* The consolidation of tax accounts for each taxpayer. The separate accounts for different taxes, such as income tax, Pay As You Earn for employees and VAT of taxpayers who run businesses, may be consolidated into one account.
* SARS will have to give you a statement of the grounds for its assessment whenever it issues an assessment that is not in accordance with the return you have submitted.
* If SARS audits your tax affairs, the Tax Administration Bill proposes that it must provide you with more information, including a regular audit report and a notice of the conclusion of the audit, so that you will have an opportunity to respond before an assessment is issued.
* The bill proposes giving SARS the power to apply for a court order to compel you to repatriate your foreign assets if you owe tax in South Africa.