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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

• http://www.TaxRadar.net - client funding

• Prof D N Erasmus –

daniel@TaxRiskManagement.com

• http://www.ErasmusOnTax.com

• 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• Introduction - survey

• An approach to Tax Risk Management & recent article

• International Ethics Standards Board for Accountants

• SARS officials – Relationship Managers – ATO experience

• Specific provisions in the TAA relevant to audits

• Audit Commencement & SARS response

• Key Constitution provisions• S 1(c) Principle of Legality; S 2; S 33; S 35(3)(j); PAJA – “administrative action” & S6(2) ; S 195

• 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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INFORMATION GATHERING & ENFORCEMENTSARS POWERS Taxpayers RightsInformation gathering 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

Inspection at premises without prior notice Limited grounds (e.g. identity of occupant) Private dwelling – occupant must give consent

Request for information: Any‘relevant material’ re identifiable taxpayers & group of

taxpayers Reasonable specificity of request

Limited to records reasonably maintained

Time extension must be considered Just cause basis for refusal

Interview at SARS offi ce & production of relevant material

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 mayrequest different date

Notice must state initial basis & scope of audit Private dwelling – occupant must give consent Taxpayer may recover cost e.g. photocopying

TAA: BALANCE BETWEEN POWERS & RIGHTS (1)

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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 Separation between audit and criminal investigation

Investigations 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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RECOVERYSARS POWERS TAXPAYER RIGHTSRecovery 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)Debt relief Deferment by instalment payment agreements Write off or compromise agreements Suspension pending outcome of dispute Remittance of penalties and interest Voluntary Disclosure Programme - penalty reliefPersonal liability Prescribed criteria in TAB before 3rd party will be held liable Normal court remedies during recoveryRepatriation of Prescribed judicial procedure before Judge of High Courtforeign assets Preservation of Prescribed judicial procedure before Judge of High Courtassets

TAA: BALANCE BETWEEN POWERS & RIGHTS (3)

QUESTIONSQUESTIONS

• 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.