LEARNING UNIT 19 (READ ONLY)

INTRODUCTION Learning unit

LEARNING OUTCOMES

19
PRESCRIBED STUDY MATERIAL FOR THIS
LEARNING UNIT

CONTENT OF LEARNING UNIT

TAX ADMINISTRATION ACT

19.1 Background
19.2 Registration of taxpayers
19.3 Income tax returns
19.4 Assessments
19.5 Dispute resolution
19.6 Tax payments and refunds
19.7 Penalties
19.8 Tax practitioners

CRIMINAL OFFENSES
19.9 Introduction
LEARNING OUTCOMES
CONCLUSION
CRITICAL THINKING

REGISTRATION OF TAX PRACTITIONERS

AND REPORTING OF UNPROFESSIONAL
CONDUCT
19.10 Introduction
LEARNING OUTCOMES
CONCLUSION
CRITICAL THINKING

GENERAL PROVISIONS
19.11 Introduction
LEARNING OUTCOMES
CONCLUSION The Tax
CRITICAL THINKING
Administration
TRANSITIONAL PROVISIONS
19.12 Introduction Act
LEARNING OUTCOMES
CONCLUSION (Not
CRITICAL THINKING
examinable)
19.13 Questions

LITERATURE CONSULTED
 INTRODUCTION AND BACKGROUND TO THE TAX ADMINISTRATION ACT

Read carefully through the following sections, which will provide you with enough information on the
design, background, and development of the Tax Administration Act. Although these sections
contain a large volume of information, it provides you with background detail on some of the most
important aspects concerning the application of various provisions of the Tax Administration Act.
Also read Chapter 19 in the prescribed textbook.

WHY IS THE TAX ADMINISTRATION ACT IMPORTANT?

THE IMPORTANCE OF TAX ADMINISTRATION SYSTEMS

In most countries, tax systems generate the bulk of income required to fund infrastructure. Because
of policy considerations, the administration of the tax systems is managed by revenue bodies. Any
policy consideration must ensure the effective management of systems of assessments and self-
assessment. As there are vast numbers of clients or taxpayers to be administered in a tax system,
revenue bodies globally require sufficient powers and independence to accomplish any vision,
mission, and objectives (or values) in an efficient and effective manner.

Revenue bodies must be seen to administer the taxation affairs of the State (or fiscus) in a fair and
impartial manner. Consequently, sufficient checks and balances must exist to ensure the
transparency of the operations of revenue bodies. In addition, a matching level of accountability
must exist for the effective and efficient administration of tax systems. The ultimate advancement of
an efficient and effective tax administration system should be characterised by strong fiscal policy
consideration.

South Africa is a member state of the G20 countries. The G20 is an important forum that establishes
international cooperation initiatives on some of the most important global and economic issues
facing the world today. One of the objectives of the G20 is to secure a new co-operative tax
environment for developing countries. South Africa, as a developing country, is also a “non-member”
of the Organisation of Economic Co-operation and Development (OECD) and cosignatory to
initiatives for the advancement of tax administration in developing countries, including Brazil,
Russia, India, China, and South Africa (BRICS). As governments face numerous challenges to
overcome the global financial crises, burning issues remain, such as the need for effective tax
administration, international tax fraud trends and tax evasion schemes.

Revenue must have an unclouded vision, mission, and objectives with adequate resources for
operational needs. Effective structures for managing the tax system are indisputable, including the
presence of a stable legal framework. The South African Revenue Service (SARS) is the responsible
authority for the administration of the South African tax system. The relevance of its mission, vision
and values are highlighted below and are available in SARS's annual reports.

THE VISION, MISSION AND VALUES OF SARS

MISSION

To optimise revenue yield, to facilitate trade and to enlist new tax contributors by promoting
awareness of the obligation to comply with tax and customs laws, and to provide a quality, respon-
sive service to the public.

VISION

SARS is an innovative revenue and customs agency that enhances economic growth and social
development, and that supports the country’s integration into the global economy in a way that
benefits all South Africans.

VALUES

SARS has zero tolerance for corruption. SARS optimises its human and material resources and
leverages diversity to deliver quality service to all those engaged in legitimate economic activity in
and with South Africa. SARS's organisational relationships, business processes and conduct are
based on the following set of values:

• mutual respect and trust

• equity and fairness
• integrity and honesty
• transparency and openness
• courtesy and commitment

THE BEGINNING

Please read carefully through this section as it provides a road map of comments and responses by
different stakeholders that, in turn, provides background information on the enactment of this Act.

The memoranda on the objects of the Tax Administration Laws Amendment Bill provides back-
ground knowledge to the questions posed by stakeholders in determining the constitutionality of tax
provisions under the Tax Administration Act. The memoranda are available at:

https://www.sars.gov.za/wp-content/uploads/Legal/ExplMemo/LAPD-LPrep-EM-2011-03-
Memorandum-Objects-Tax-Administration-Bill-2011.pdf

THE ACT ITSELF and a short guide to the Tax Administration Act

Start reading
SARS short guide to the Tax Administration Act, 2011 (Act No. 28 of 2011). The guide was written
in 2018 and does not take law amendments after that date into account.

https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-TAdm-G01-Short-Guide-to-the-
Tax-Administration-Act-2011.pdf
You can find the Tax Administration Act (as amended) on SARS website.

https://sars.mylexisnexis.co.za/

WHAT DOES THE EXPLANATORY MEMORANDUM TELL US ABOUT THIS ACT?

1. This Act provides for the effective and efficient collection of taxes.
2. It allows for the alignment of administrative provisions of tax Acts into a single piece of
legislation.
3. It provides the ambit of SARS powers and duties.
4. It creates delegations for SARS officials.
5. It provides SARS with the ability and authority to act in legal proceedings.
6. It provides for the authority and duties of the Minister of Finance.
7. It establishes an office for the Tax Ombud and determines its powers and duties.
8. It provides for registration requirements of taxpayers.
9. It provides for the submission of returns, the duty to keep records and reportable arrange-
ments.
10. It standardises requests for information and conducting an audit or investigation by SARS.
11. It provides for inquiries, searches and seizures by SARS and confidentiality of information.
12. It provides the necessary support in issuing advance rulings, tax assessments and dispute
resolutions.
13. It provides for the payment of taxes, recovery of taxes, recovery of interest on tax debts and
refund of surplus payments.
14. It provides for write-offs and compromises of outstanding tax debts or tax liabilities.
15. It provides for the imposition and remittance of administrative non-compliance penalties and
understatement penalties.
16. It provides for an enduring voluntary disclosure programme (VDP) for criminal offences and
appropriate sanctions.
17. It provides for reporting of unprofessional conduct by tax practitioners and problems connected
therewith.

DESIGN OF THE TAX ADMINISTRATION ACT

THE CHAPTERS OF THE TAX ADMINISTRATION ACT ARE:

Chapter 1: Definitions
Chapter 2: General administrative provisions
Chapter 3: Registration
Chapter 4: Returns and records
Chapter 5: Information gathering
Chapter 6: Confidentiality of information
Chapter 7: Advance rulings
Chapter 8: Assessments
Chapter 9: Dispute resolution
Chapter 10: Tax liability and payment
Chapter 11: Recovery of tax
Chapter 12: Interest
Chapter 13: Refunds
Chapter 15: Administrative non-compliance penalties
Chapter 16: Understatement penalty
Chapter 11: Recovery of tax
Chapter 14: Write-off or compromise of tax debts
Chapter 17: Criminal offences
Chapter 18: Registration of tax practitioners and Reporting of unprofessional
conduct
Chapter 19 General provisions
Chapter 20: Transitional provisions

A SPECIAL NOTE ON THE TAX ADMINISTRATION ACT

The Tax Administration Act was written by the South African Revenue Service (SARS). The ambit
of the Tax Administration Act was thus determined by SARS's administrative needs for better
taxation administration. Given the ambit of the Tax Administration Act, this piece of legislation is
underpinned by just administrative action. As SARS is bound by the requirements for just admi-
nistrative action in terms of Section 33 of the Constitution of South Africa, 1996, any
administrative action taken by SARS must be reasonable and meet all the constitutional
obligations imposed on it.

If you are to challenge SARS on any administrative action, you need to take cognisance of two
requirements, namely any deprivation of taxpayer rights and the specific determination made by the
Commissioner. If the determination or administrative action taken by SARS complies with the
principles of just administrative action, there is no breach of taxpayer rights. If the determination
does not comply with the principles of just administrative action, taxpayer rights have been
breached. Although the Constitution of South Africa, 1996 provides for administrators to
comply with the principles of just administrative action, the Promotion of Administrative
Justice Act (PAJA) goes much further. (We will, however, not deal with any questions regarding
the principle of legality or other human rights.)
PAJA sets out the necessary procedural requirements for administrators to follow when making
administrative decisions. Thus, any administrative decision taken by SARS officials must meet the
requirements of PAJA read together with the provisions of Section 33 of the Constitution of
South Africa, 1996. A determination that meets the above requirements will be considered a
reasonable determination.
 WHEN WORKING THROUGH THE TAX ADMINISTRATION ACT

DO NOT BE CONCERNED

As the Tax Administration Act consists of 272 sections, it is impossible, for most of us, to memorise
each provision of every section. Even if you were fortunate and able to memorise each provision, it
would still not mean that you understand the meaning of its contents and in its context. Thus, when
reading each section, try to DESCRIBE to yourself or someone else the crux of the specific piece
of legislation you are reading in your own words. Try to see this specific piece of legislation through
the lens of the writers. Decide WHY they would have written that specific section (for what purpose).
If you can formulate your idea as to WHY this specific piece of legislation would be relevant, your
further study of any provisions of the specific piece of legislation would become more meaningful.
Remember, for you to vindicate the rights of your clients, you must know the law. The law was
written for a purpose – you must know the purpose!

AN INTRODUCTION ABOUT CHANGE

A NEW WAY OF DOING THINGS

As we all know, it is the duty of government to provide services to its people with the taxes collected
from taxpayers. To provide for these services, government needs to use systems of delivery,
including a good tax administration system. The South African government has earmarked tax
administration with a view to enhance administrative functionality for end users and taxpayers alike.
These changes also brought about a change in tax legislation and have been combined into a new
piece of legislation called the Tax Administration Act. The changes brought about by tax
administration law firstly require that tax practitioners acquire a good knowledge of the general
principles of tax law and secondly, apply it in practice.

All tax legislation must pass constitutional muster and must be read together with the Constitution
of the Republic of South Africa, 1996. It thus requires tax practitioners to know something about the
Constitution as well.

CONTRIBUTION OF THE TAX ADMINISTRATION ACT

WHAT NEW CHANGES DOES THE TAX ADMINISTRATION ACT CONTRIBUTE TO THE
SOUTH AFRICAN TAX LANDSCAPE?

An important contribution by the Tax Administration Act is the fact that it has streamlined and
combined various administrative provisions that can be construed as similar or generic in nature.
These administrative provisions were previously duplicated in different tax Acts, which made the
administration of the various Acts problematic. This new single piece of legislation incorporates
various administrative processes into a single process and at the same time modernises the South
African tax administration system. This piece of legislation provides the pillars for further reform and
modernisation of tax processes and the rewrite of the Income Tax Act. Taxpayer rights are now
recognised although not specifically described as such. Further, the Act imposes greater
administrative obligations on SARS as the tax administrator acting on behalf of government.

The Act introduces new definitions and some of them have a more widespread application. These
definitions must provide certainty in terms of the interpretation and application of the provisions of
the law.

A SNAPSHOT OVERVIEW OF THE TAX ADMINISTRATION ACT

PICTURE THIS ...

As you would have gathered from the previous sections, the Tax Administration Act is made up of
distinct parts of different tax Acts. The secret to this Act lies in the fact that tax practitioners,
accountants and other persons dealing with this legislation must ensure that their paperwork is in
order and up to date, that their record-keeping system complies with the relevant provisions of the
Act in terms of record keeping and that all correspondence with both clients and SARS are always
in place.

This piece of legislation requires that tax practitioners must be au fait with (having a good or detailed
knowledge of) its regulatory provisions. Some of your clients will not be able to understand all the
intricacies of this Act and it is therefore essential that as a tax practitioner, you become wise in the
ways of this piece of tax law.

It is also important that you understand the principle of "pay now argue later" as determined by
Harms J in the court decision known as Metcash. As already noted, it is the duty of the Commis-
sioner for SARS to collect taxes on behalf of the fiscus. However, this duty also carries an obligation
towards taxpayers. For example, Section 57 of the Tax Administration Act defines a specific
taxpayer right. See if you can identify this right. As an adviser, you need to point out to your
clients any specific application of the Act that is required and must be fulfilled in terms of the law.
This Act is your source of knowledge in both the application of tax administration legislation and the
duties you are required to fulfil. For instance, SARS may lodge a complaint about a registered tax
practitioner’s non-compliance with an obligation or gross negligence under a tax Act to a recognised
“controlling body.” This may only be done by a senior SARS official as determined under Section
241(2) of the Tax Administration Act. However, it also means that the person against whom the
complaint was lodged has a right to request information from SARS (within 21 business days) and
the right to lodge an objection in this regard.

Remember, this Act will apply to all other tax Acts as well. It is therefore important to keep abreast
of the latest amendments and changes in legislation regarding taxation administration. Try to
familiarise yourself with these changes by regularly attending related workshops, discussing your
concerns with fellow colleagues, and subscribing to SARS newsletters. This will provide you with
valuable information about any changes in legislation or practice.
 IMPORTANT!

➢ We as lecturers want to make your studies as easy as possible and to assist you in
understanding the Tax Administration Act (TAA).

➢ Always try to think logical and not to learn / read without understanding.

➢ Always put yourself in the shoes of either the taxpayer or SARS

➢ A person must register as a taxpayer (STEP 1)

➢ The taxpayer must submit a tax return (based on evidence) (Step 2)

➢ SARS will assess the tax return to establish if (STEP 3)

➢ The taxpayer owes SARS money and must pay the tax or SARS must refund the taxpayer
and pay back the excess tax paid. (STEP 4)

First the basic building blocks

Payment by
Register as Taxpayer SARS
taxpayer
taxpayer submit return Assessment
refund by SARS

At each stage ask yourself,

❖ What information is needed?

❖ What can go wrong from either SARS or the taxpayer’s side?

Let us focus on building block 1 (register as a taxpayer)

The information that SARS will need to make the tax administration easier will be for example:
▪ If SARS wants to contact the taxpayer SARS needs telephone / mobile phone number/s,
email address if available, the taxpayer’s address.
▪ Information about the taxpayer’s bank account (inter alia for refund purposes).
▪ Your ID if you are a natural person to establish your age (for the age rebates etc), married in
community of property (passive income is taxed equally in both the spouse’s names).
▪ Any other relevant information.

If a person is liable for tax and does not register. Then what? It is an offence! We all have a duty to
pay our taxes.

This learning unit discusses the administrative procedures to be followed during a year of
assessment. These procedures are applicable to individuals and businesses (companies, small
business corporations, trusts etc.) So, you can apply this on your own income and tax return, as
well as in your capacity as the owner or accountant of a business. These procedures form a process,
which can be summarised as follows:
 A person registers as a
taxpayer

A person registers on
SARS eFiling

The taxpayer receives a tax

return
The taxpayer earns income and
The taxpayer completes the receives an IRP5 or IT3 (for an
tax return indicating income, individual) or prepares a financial
expenses, and allowances, statement (for a business)
and submits it to SARS

The taxpayer receives an

assessment from SARS

Decision The taxpayer accepts the

assessment and pays any
outstanding tax

If the taxpayer disagrees with

the assessment, he/she
follows the objection
procedures (see later)
The rules and procedures for each step in the above-mentioned process will be discussed, as well
as the objection process and the future action that may be instituted.

LEARNING OUTCOMES

After you have completed this learning unit, you should be able to:

➢ state the process of registering as a taxpayer

➢ illustrate the process of assessment

➢ summarise the process of objecting and appealing to an assessment.
 PRESCRIBED MATERIAL FOR THIS LEARNING UNIT

There is no related chapter in the prescribed textbook. All the necessary learning
material is contained in the learning unit. Some references are made to outside
sources, which should be accessed as well.

CONTENTS OF LEARNING UNIT

19.1 BACKGROUND No prescribed text

The Tax Administration Act contains certain procedures that must be followed to
ensure that all tax due is collected. This is achieved through the Commissioner, who has
certain discretionary powers and who must make certain decisions. If the taxpayer does not agree
with such a decision, he/she can lodge an objection and, if the dispute is not resolved, further steps
may be taken. This learning unit will cover all these aspects.

19.2 REGISTRATION OF TAXPAYERS No prescribed text

Any person (including an individual, company, or trust), who becomes liable for any
normal tax at any time or who becomes liable to submit any income tax return, unless a
specific tax act provides otherwise, must apply to register within 21 business days after becoming
obliged to register.

The person,who applies to be registered as a taxpayer must visit a SARS branch. Once SARS has
processed the application, the applicant will be issued with an income tax reference number. SARS
currently requires all employees receiving any form of employment income to register as taxpayers
and to acquire income tax reference numbers. Therefore, all salaried employees will be registered
for tax purposes by their employers if they have not already been registered for tax.
You may ask: How will SARS know if I do not register for tax?
This is where ethics come in, and this principle should be applied by all citizens of South Africa.
This also supports the UNGC (United Nations Global Compact) principle 10, namely “businesses
should work against corruption in all its forms”. At its simplest, ethics is a system of moral principles
that is concerned with what is good for individuals and society. The implication of not paying your
fair share of taxes is that you act unethically. If you are a citizen and you use all the benefits of
being a citizen like health care and education, you are responsible for paying taxes just like anyone
else. Everyone has a role in preventing corruption by acting with personal integrity and ma-
king ethical choices.
 19.3 INCOME TAX RETURNS No prescribed text

The source documents used as the basis for the assessment process are called income
tax returns: ITR12 (for individuals), ITR12T (for trusts) and ITR14 (for companies).
These returns are designed by SARS and available online on SARS e-Filing for
taxpayers to complete. If a taxpayer does not have access to e-Filing, a SARS branch can be visited
where a SARS official will assist the taxpayer to complete the tax return online at the branch. The
Tax Administration Act contains rules regarding who should, or should not, submit returns. Various
administrative regulations and stipulations in the Act prescribe how and in what way returns should
be submitted.

As discussed previously, the tax return forms the basis for the South African tax system. The
information the taxpayer completes on the return is used to calculate the taxpayer’s tax liability. The
information for businesses is obtained from the annual financial statements.

Something to think about: Why is it necessary to have formal rules for the
administrative procedures?

19.4 ASSESSMENTS No prescribed text

Once SARS has received the tax returns, the information on the returns is processed
and an income tax assessment (ITA34) is uploaded on e-Filing. The ITA34 indicates the
calculation of taxable income and normal tax for the year of assessment. The ITA34 also
indicates if any tax is due by or refundable to the taxpayer for the year of assessment.

Where a taxpayer fails to submit a return or submits the return after the due date, SARS may:
➢ issue an estimated assessment;
➢ issue an additional or a reduced assessment; or
➢ withdraw an assessment.

19.5 DISPUTE RESOLUTION No prescribed text

If taxpayers are not satisfied with an assessment, they may lodge an objection. You will
notice that for every step in the process, specific rules, especially date rules, should be
complied with. If these rules are not complied with, SARS or the court could reject the
case without hearing it, and the taxpayer would be liable to pay the tax as assessed.

The objection and appeal procedures for the taxpayer can be summarised as follows:

Receives assessment
from SARS
(ITA34)
 Accepts assessment and pays the
Correct
assessed tax or receives a refund
Yes
No
Lodges an objection on a NOO
(notice of objection) form via
eFiling with SARS (or ADR1 form)
Accepts new assessment
Yes and pays revised assessed
Rectify
tax or receives a refund

No
Lodges an appeal
(NOA (notice of appeal) or ADR2 form)

Alternative Tax
dispute Board/Tax
resolution Court

You should know and understand the following about objection and appeal:
➢ It is the taxpayer’s responsibility to prove that the assessment is incorrect; in tax terms, we say
that the burden (onus) of proof vests with the taxpayer.
➢ The prescribed objection procedure must be followed.
➢ The prescribed appeal procedures against a disallowed objection must be followed.
➢ The alternative dispute resolution (ADR) process must be followed.
➢ The taxpayer should take note of the way in which tax is paid in the case of a pending objection
and appeal.

A taxpayer may enter into an ADR with SARS at any time. The purpose of this process is to settle
tax disputes in a speedier, more cost-effective manner and, as far as possible, out of court. Both
parties must agree that the ADR procedures can be followed. However, this process may be stopped
at any time and the case referred to the court. If the option of taking the matter to court is chosen,
the matter will generally first be taken to either the Tax Board or the Tax Court, depending on the
value and merits of the case. Thereafter, the party that loses the case may follow the normal South
African legal precedent, firstly going to the High Court, then the Supreme Court of Appeal and even
in certain cases, to the Constitutional Court.

Something to think about: Why are decisions by SARS subject to objection and
appeal?

19.6 TAX PAYMENTS AND REFUNDS No prescribed text

 Tax must be paid by the date notified by SARS (which is found on the assessment) and
must be paid in a single amount or in terms of an instalment payment agreement. Tax
must be paid regardless of whether an objection or an appeal is pending. SARS may
allocate a payment received against an amount of penalty or interest or the oldest
amount of tax outstanding (this is known as the first-in, first-out principle).

If a taxpayer owes SARS a tax amount that is not paid in full by the effective date or if a taxpayer is
due a refund, interest accrues on the outstanding balance of tax due or the refund at a prescribed
rate that the Minister may determine from time to time by notice in the Government Gazette. The
interest accrues for the period from the effective date the tax is due/payable to the date the tax is
paid.

19.7 PENALTIES No prescribed text

The Commissioner may impose an administrative non-compliance penalty in certain

cases, for example if a taxpayer fails to keep proper records or obstructs a SARS official.
The penalty may comprise a fixed amount or may be percentage-based. The fixed-
amount penalty is charged in terms of a prescribed table in the Tax Administration Act. The
percentage-based penalty is prescribed in the relevant Act, for example, a matter regarding income
tax will be in the Income Tax Act and a VAT matter will be in the VAT Act.

There is also an understatement penalty, which relates to an omission (i.e., not submitting a tax
return) or an incorrect statement in a tax return. This penalty is also determined in accordance with
a prescribed table in the Tax Administration Act.

19.8 TAX PRACTITIONERS No prescribed text

Any person,who provides advice to any other person regarding any Act administered by
the Commissioner or who completes or assists in completing a return, must register as
a tax practitioner in the prescribed manner and form.

CRIMINAL OFFENCES: CHAPTER 17 OF THE TAX ADMINISTRATION ACT

19.9 INTRODUCTION No prescribed text

This chapter deals with criminal offences liable for prosecution as per the country’s
criminal procedure legislation.

Read sections 234 to 238

THIS IS SERIOUS

General statutory offences are now included in the Tax Administration Act. Section 234 contains an
extended list of non-compliance offences (if convicted of any offence, a person may receive a fine
or imprisonment of up to two years). It is therefore best to always ensure that proper communication
takes place with a client in respect of any possible criminal offences under the Act.

LEARNING OUTCOMES

After you have completed this learning unit, you should be able to:

➢ explain how the reverse onus of proof has been removed under the current law
➢ explain what "evidentiary burden" means and how the taxpayer must apply this provision
➢ describe the different tax offences under the Tax Administration Act
➢ describe the various categories of criminal offences provided for under the Tax Administration
Act

Keywords: criminal offence, sentence, convicted, imprisonment, fraud, false statement

Therefore, any document you submit to SARS on behalf of a client should similarly have been
communicated with the client and in a proper manner. A proper mandate must be provided in writing
with the necessary consent and authorisation from the client.

Tax evasion offences are described under section 235 of the Act. They relate to:
● a false statement
● a false entry
● a false answer
● preparation or maintenance of false books of account
● fraud or contrivance (scheme)
● making a false statement to obtain any refund or exemption from tax

Any of the above criminal offences, can mean on conviction a fine or imprisonment of up to five (5)
years.

It is interesting to note that section 235(2) refers to the presumed guilt of the taxpayer. The real
question is whether this measure will pass constitutional muster or scrutiny under section 35 of the
Constitution? Section 237 is especially important to tax practitioners. As a tax practitioner, ensure
that a return or any other document is submitted to SARS with the consent of the taxpayer. It is
therefore important to keep evidence on the taxpayer's file regarding proper consent and
authorisation. The use of an electronic or digital signature in electronic communication with
SARS without the consent of the taxpayer is prohibited.

For self-study purposes, see the Canadian Court decision held in R v Jarvis [2002] 3 SCR 757. This
decision has established different principles dealing with audits and investigations, administration
and enforcements, the principle against self-incrimination, the constitutional rights of taxpayers,
unreasonable search and seizure, and information and documents obtained during an audit.
This decision is available at:
http://scc.lexum.org/decisia-scc-csc/scc-csc/scc-csc/en/item/2015/index.do

CONCLUSION

Chapter 17 dealt with the various categories of criminal offences, which included

• general offences concerning non-compliance

• serious tax offences relating to tax evasion
• filing a return without authority or using a signature without authority or authorisation
• contravening the secrecy provisions

The existence of these statutory offences does not prohibit the prosecution of a person for an offence
committed under the common law. SARS may pursue criminal prosecution in addition to imposing
an administrative non-compliance penalty or understatement penalty. However, "administrative
double jeopardy" is avoided in that an administrative non-compliance penalty may not be imposed
where an understatement penalty has already been imposed. Only a Senior SARS official may lay
a complaint against an offender with the South African Police Service (section 235(3)).

TAX OFFENCES UNDER THE TAX ACTS

As stated above, certain tax-specific offences remain in the tax Acts, for example, an offence under
Schedule 4, paragraph 30 of the Income Tax Act where an employer uses or applies employees'
tax deducted for purposes other than the payment of such amount to SARS. Several offences which
are unique to value-added tax remain under section 58 of the VAT Act.

OTHER OFFENCES UNDER THE TAX ADMINISTRATION ACT

Other offences provided for in Chapter 17 are criminal offences relating to secrecy provisions and
criminal offences relating to filing a return without authority.

PUBLICATION OF NAMES OF OFFENDERS

The Commissioner is empowered to make public the name, area of residence, offence and sentence
of people convicted of a tax offence once all appeal remedies have been exhausted by the accused.
This form of social banishment is aimed at making criminal sanctions a more effective deterrent
against non-compliance and tax evasion.

JURISDICTION OF COURTS IN CRIMINAL MATTERS

A person charged with an offence under the Tax Administration Act may be tried in respect of that
offence by a criminal court having jurisdiction in any area in which that person resides or carries on
business, in addition to jurisdiction conferred upon a court by any other law.

CRITICAL THINKING
1. When do criminal non-compliance deeds occur?

A criminal offence may be committed if a person does not comply with an obligation imposed under
a tax Act. The Tax Administration Act contains a broad list of these obligations. These offences are
committed if the person performs or fails to perform an act wilfully (with intent). The phrase “without
just cause” was deleted.

2. What constitutes offences where a taxpayer is subject to a fine or imprisonment for a

period not exceeding two years if found guilty?
• the failure to register and notify SARS of a change to registered particulars
• the failure to appoint a representative taxpayer
• refusing or neglecting to take an oath of secrecy or solemn declaration
• the failure to retain records or to retain them in the form required
• not complying with a request issued under the information-gathering powers
• not disclosing relevant material facts to SARS when required
• the failure to comply with a directive or instruction issued by SARS to the person under a tax
Act
• the refusal to give assistance during a field audit or criminal investigation as required
• impeding the collection of tax by assisting a taxpayer to dissipate assets

Note: These offences are committed if the person performs or fails to perform the relevant obligation
deliberately.

3. What kinds of offences are identified?

Offences may be divided into "normal" tax offences and serious or severe tax offences. Serious tax
offences relate to intentional tax evasion. One distinction to a "non-compliance" offence is that the
period of imprisonment for a serious tax offence is a sentence of up to five years. The investigation
of a serious tax offence must be conducted with due regard to the rights that a suspect has (by
suitably qualified and experienced SARS officials). An investigator must have authority from a senior
SARS official to investigate, and only a senior SARS official may lay a complaint with the police
concerning an offence related to tax evasion.

The "reverse onus" under the current law has been removed and replaced with a practical
evidentiary rule. In a prosecution under the evasion provisions, the person who makes a statement
that is the basis of the evasion, is considered to have committed the offence except if able to prove
that there is a reasonable possibility that he or she was unaware of the falsity of the statement and
that that ignorance was not due to negligence (culpa). This does not result in a so-called "reverse
onus", but only places on the accused an evidentiary burden in relation to the statement made by
him or her. If discharged the onus would remain on the State to prove beyond reasonable doubt
knowledge of, or negligence in relation to, the falsity of the statement. While it may limit the
fundamental right to silence (section 35 of the Constitution), it does so only in relation to facts which
are peculiarly within the knowledge of the accused and in respect of which it would not be
unreasonable to require the accused to discharge an evidentiary burden.
REGISTRATION OF TAX PRACTITIONERS AND REPORTING OF UNPROFESSIONAL
CONDUCT – CHAPTER 18 OF THE TAX ADMINISTRATION ACT
 19.10 INTRODUCTION No prescribed text

This chapter deals with registration of tax practitioners and the reporting of
unprofessional conduct to SARS and the recognised controlling bodies of the tax
practitioners.

Read sections 239 to 243

LEARNING OUTCOMES

After you have completed this learning unit, you should be able to:

➢ explain what is meant by a recognised "controlling body"

➢ explain under what circumstances a person must register as a tax practitioner
➢ explain when a person will not need to register as a tax practitioner
➢ describe the practical process of a controlling body of a tax practitioner managing a complaint
➢ identify the information that may be disclosed by SARS regarding a complaint
➢ identify any remedy available to the tax practitioner before SARS can lay a complaint
➢ explain how a complaint must be considered by the recognised controlling body

Keywords: tax practitioners, unprofessional conduct, reporting, SAIT, SAICA, recognised

controlling body, complainant, litigation

REGISTRATION OF TAX PRACTITIONERS AND REPORTING OF UNPROFESSIONAL CON-

DUCT

If you are a natural person, providing advice, assisting with, or completing a return for submission
to SARS, you are obliged to register with SARS as a tax practitioner (section 240). A person must
register with a recognised controlling body such as the South African Institute of Taxation (SAIT) or
the South African Institute of Chartered Accountants (SAICA). The registration is obligatory within
30 business days after the date on which a person described under section 240 for the first time
provided advice, assisted with, or completed a return for a taxpayer.

IS THERE ANY EXCLUSION TO THE ABOVE?

Yes. Section 240(2) does not apply in respect of a person who (i) provides advice in connection with
litigation concerning the Commissioner as party or where the Commissioner is a complainant; (ii)
provides the advice solely as a related or secondary part of providing goods or services to another
person; (iii) provides advice or completes a document or assists employees of the taxpayer to
complete a document; and (iv) acts under the direct supervision of a registered tax practitioner.
Remember that a tax practitioner remains accountable for the actions of those under his or her direct
supervision.
WHERE MUST I REGISTER AS TAX PRACTITIONER?

You must firstly register with a recognised controlling body and then with SARS (section 240(1)).

WHICH CONTROLLING BODIES ARE RECOGNISED IN TERMS OF THE TAX ADMINISTRA-

TION ACT?

Section 240A recognises SAIT, SAICA, CIMA, CGISA, FPI, IAC, SAIPA, ACCA, CIBA, , a law
society established under the Attorney's Act No. 53 of 1979, General Council of the Bar of South
Africa, a bar council, a society of advocates or a similar statutory body.

WHEN IS A BODY RECOGNISED IN TERMS OF THE TAX ADMINISTRATION ACT?

Section 240A gives recognition if the body

• requires minimum qualification and experience

• maintains continuing professional education requirements
• has a code of ethics and conduct
• has a disciplinary code and procedures
• is approved in terms of section 30B of the Income Tax Act for purposes of section 10(1)(d)(iv)
• has at least 1 000 members or has at least the reasonable prospect of securing 1 000 members
within a year of applying

ARE SARS OFFICIALS OBLIGED TO REGISTER AS TAX PRACTITIONERS?

No, SARS officials are subject to numerous oversight structures to which tax practitioners are not.
Besides the constitutional obligations imposed on SARS, it is also bound in terms of the demands
of the Public Protector, the Tax Ombud and the standing Financial Committee of Parliament.

COMPLAINTS TO CONTROLLING BODIES

Section 241 gives SARS the right to lodge a complaint with a “recognised controlling body” if a
registered tax practitioner’s conduct constitutes a certain contravention or omission of provisions of
the Act in respect of a taxpayer's affairs. Any information about a taxpayer that is confidential may
be disclosed by the SARS official (section 242).

CONCLUSION

SARS may report unprofessional conduct related to a professional or a tax practitioner. This must
be reported to a recognised controlling body such as SAICA or SAIT. A condition has been added
to the existing requirement that a person who gives tax advice must register as a tax practitioner
with SARS. Any person who during the five years before his or her application for registration has
been removed from a related profession or professional body for dishonesty, or convicted of a crime
involving dishonesty, may not be so registered. Section 241 is applicable.
 CRITICAL THINKING

1. When are you obliged to register with a recognised controlling body and SARS as a
tax practitioner?

When you fulfil your obligations for the payment of money.

2. What do you suggest as a viable alternative to the above?

Give your own view on this matter and discuss your view with a peer or colleague.

3. Is there really an alternative to SARS delivering notice to the taxpayer and the tax
practitioner of its intention to lodge a complaint?

It is suggested that a taxpayer request a written notification of the intended complaint and
information to be disclosed. An objection may be lodged with SARS by the affected person within
21 business days from such notification. SARS may lodge the complaint if satisfied the objection
will not be sustained or submit the complaint after expiry of the aforementioned period.

If a person's confidential information is to be disclosed in a hearing, only persons considering the

complaint may attend such hearing. The recognised controlling body must provide for such pro-
cedures in its disciplinary code. A copy of the disciplinary code should be made available to the
affected persons to vindicate any rights.

Secrecy must be preserved with due regard to a taxpayer’s information unless the disclosure is
ordered by a competent court with jurisdiction in the matter (section 243(3)).

4. Do you think all the recognised controlling bodies have amended their constitutions
to make provision for the above aspects?

Try to obtain the constitution of a recognised controlling body and have a look at the specific sections
dealing with disciplining members and confidentiality of information.

5. When may SARS report a professional for misconduct?

If an intentional (dolus) or negligent (culpa) act of a registered tax practitioner resulted in a taxpayer
avoiding or unduly postponing performing an obligation contained in a tax Act, SARS may report
that registered tax practitioner to a recognised controlling body. In addition, if a registered tax
practitioner conducts himself or herself in a manner that exposes the specialist to disciplinary action
being taken by the controlling body, SARS may report that specialist to the controlling body.

6. What is the procedure?

The Tax Administration Act offers a procedure for reporting which arises when a decision to report
the registered tax practitioner is taken by a senior SARS official. The registered tax practitioner and
the taxpayer concerned will be given prior notice of SARS’s intention to lodge the complaint, and a
chance to object to SARS’s proposed report. An objection must be considered before SARS
continues reporting the registered tax practitioner. The report to the controlling body may include
taxpayer information. However, the controlling body is obliged to always maintain the confidentiality
of taxpayer information, including during a disciplinary hearing unless a competent court order
otherwise.

7. How do we contextualise a "tax practitioner", "recognised controlling bodies" and

managing disciplinary matters?

Different tax Acts are applicable to different persons. For example, as the VAT Act refers to vendors,
it is simply necessary to understand that the term "tax practitioner" must include "VAT practitioner".
As there are no definitions for either a "tax practitioner" or a "VAT practitioner" in the Tax
Administration Act, it is still uncertain why a "tax practitioner", who is undefined, must be registered
with two controlling bodies. Section 240 goes on to explain in great length who are included and
who are excluded from being tax practitioners.

SARS recognises certain "controlling bodies" with which tax practitioners must register in terms of
the Tax Administration Act. Only senior SARS officials may lay a complaint with a "controlling body".
A registered tax practitioner is thus not exclusively confined to being disciplined by a "registered
controlling body", but also by a "controlling body". In practice, the intention must be that recognised
controlling bodies should deal with matters related to registered tax practitioners. Therefore, section
243 determines that a complaint must be considered by a "controlling body".

8. Will the entire world know about the disciplinary hearing?

Due to the secrecy provisions governing all disciplinary matters about registered tax practitioners,
information must be kept secret. Disciplinary matters are internal processes and as such, are
managed confidentially. Only a competent court can order the disclosure of information.

9. What advice can be provided to tax practitioners in respect of providing the right
advice?

• Keep abreast of the latest changes in tax legislation.

• Sign up for regular newsletters such as parliamentary communication and newsletters.
• Visit the SARS website frequently.
• Visit the National Treasury website regularly – information related to the budget, fiscal and
monetary policy are available on this website.
• Regularly attend seminars/webinars or short courses on taxation.
• Learn more about administrative law principles.
• Ensure that filing dates are observed.
• Keep to due dates by diarising them day to day as you receive notices from clients or SARS.
• Do not accept that clients will always provide you with accurate calculations or information –
constantly double-check information.
 GENERAL PROVISIONS – CHAPTER 19 OF THE TAX ADMINISTRATION ACT

19.11 INTRODUCTION No prescribed text

This chapter deals with general provision contained in the Tax Administration Act and
other Acts.

Read sections 244 to 257

WHAT ABOUT DEADLINES?

If a specific time is imposed under a tax Act, and falls on a Saturday, Sunday, or public holiday the
taxpayer must complete the action on the last business day before the holiday. SARS may specify
a time by which a person must act, and if the person performs the action after that time, it is
considered that the act was performed the following day.

Whenever SARS is requested to extend a deadline, it may do so upon request from the taxpayer.
To do so, a request must be filed before the deadline terminates. SARS may accept the late
submission of a request for an extension if exceptional circumstances exist. A Ministerial decision
must be published in the Gazette for the variance of any dates (sections 244 to 245).

LEARNING OUTCOMES

After you have completed this learning unit, you should be able to:

➢ describe the important aspects concerning the different deadlines in terms of the Act
➢ explain what is meant by public officer in terms of the Act
➢ identify four (4) important representation characteristics, which must be observed in respect of
the position of a public officer in any company carrying on business or having an office in the
Republic
➢ identify which aspects are important in respect of the company address for notices and
documents to be delivered
➢ describe the role of the liquidator during voluntary and compulsory liquidation
➢ explain what will happen if a company acts by default in appointing a public officer
➢ identify what detail must appear on a document to ensure its authenticity
➢ describe the correct procedure(s) for delivering documents to persons other than companies
➢ describe the correct procedure(s) for delivering documents to a company
➢ explain when documents delivered will be deemed to have been received
➢ explain the rules for electronic communication
➢ explain when a tax clearance certificate will be provided to a taxpayer

Keywords: deadline, business day, communication

PUBLIC OFFICERS OF COMPANIES AND ADDRESS FOR DELIVERY

Companies that deliver business must be represented by a natural person (public officer) living in
the Republic. SARS must approve the appointment. Only a senior official of the company may
function as public officer. This person must function as the public officer in respect of the company's
performance in respect of tax obligations and will receive delivery of notices. A company must ap-
point and keep a public officer and must notify SARS of any change. SARS must approve any
change. If SARS is of the view that a person is no longer fit to represent the company as public
officer, SARS may take away its authorisation (section 246).

AUTHENTICATION OF DOCUMENTS

Under section 250, a SARS document is authentic if the SARS official's name or official designation
is stamped or printed on it; or the designation of the SARS official is contained therein. There is an
assumption that a return or other document is made or signed by the taxpayer whose return or
document it is, except if the taxpayer can prove the return or document was not made or signed by
him or her.

DELIVERY OF DOCUMENTS

Section 251 determines that a SARS notice, document or communication is viewed as having been
conveyed if (i) it was handed personally to the taxpayer; (ii) it was handed to the public officer of a
company; (iii) it was left with a person over 16 years at the person's last known residence, office, or
place of business; or (iv) if a company, at the company's registered address elected in terms of
section 247 of the Tax Administration Act; (v) it was posted by registered post or ordinary post to
the person's or the person's employer’s last known post office box number; (vi) it was posted by
registered post or ordinary post to the last known address or post box number of the company,
public officer or the public officer’s employer; or (vii) it was sent electronically to the person’s or
company's last known fax or e-mail address; or (viii) the person’s electronic filing page on the SARS
electronic filing service as defined in rules issued under section 255(1), if the person is a registered
user as defined in those rules.

OTHER IMPORTANT MATTERS

● A formal defect in a delivery of notice does not affect the communication's validity – minor
procedural defects should not invalidate proceedings provided fairness requirements are met.
A person must, however, have effectively received the communication.
● Delivery made in one of the above methods is regarded as having been received.
● If a document were posted it is regarded to have been received in the time that normal post
would usually take. SARS may, despite this rule, accept that a notice was not received or was
received at some later time, such as documents not delivered due to a postal strike.
● If a person can demonstrate that a notice was not received and has been placed at a material
disadvantage because of the imposition, SARS may withdraw the notice and reissue a different
one (section 254).
● Provision is made for SARS to issue rules governing electronic communication (section 255).

TAX CLEARANCE CERTIFICATES

Section 256 determines that a taxpayer can apply for a tax clearance certificate in the prescribed
form and manner. This means that SARS confirms the tax compliance status of the taxpayer.

WHEN MUST SARS ISSUE OR DECLINE A TAX CLEARANCE CERTIFICATE?

SARS must issue or decline a tax clearance certificate within 21 business days from the date of
application (section 256(2)).
WHEN MUST SARS ISSUE A TAX CLEARANCE CERTIFICATE?

A tax clearance certificate must be issued if the taxpayer is tax compliant. SARS may decline a tax
clearance certificate if the taxpayer has a debt outstanding or an outstanding return (section
256(3)(a) & (b)). Notwithstanding the aforementioned, it may still be granted if SARS has deferred
the payment, compromised the tax debt, or suspended payment pending an objection or appeal. A
tax clearance certificate may, however, still be granted if a suitable arrangement is in place to file
an outstanding return.

WHEN CAN SARS WITHDRAW A TAX CLEARANCE CERTIFICATE?

A certificate issued in error may be withdrawn. If the certificate was obtained through fraud, a
misrepresentation or through the non-disclosure of material facts, the certificate may be withdrawn.
See also if you can determine the period of validity of a tax clearance certificate.

CONCLUSION

This chapter has dealt specifically with general provisions under the Tax Administration Act, which
have included topics such as deadlines, public officer appointments, the delivery of documents, the
rules for electronic communication and issuing tax clearance certificates. Despite the provisions
stipulated under this Act, the regulations still to be instituted under this Act include the proceedings
of the Tax Ombud, limitations on the jurisdictions of the Tax Ombud, the nature of the taxpayer with
whose dispute the Tax Ombud should deal with, and the maximum amount involved in the dispute.
Regulations regarding the definition of biometric information are still necessary.

CRITICAL THINKING

1. Explain in practical terms what is meant by "deadline".

2. Who is regarded as a public officer of a company?
3. What happens if a company does not appoint a public officer?
4. Is it fair for SARS to have a say in who should be appointed as a public officer?
5. When will a document be regarded as professionally delivered?
6. When is the only time that a defect in the delivery of a document will not be faulty?
7. When must SARS issue a tax clearance certificate?

TRANSITIONAL PROVISIONS – CHAPTER 20 OF THE TAX ADMINISTRATION ACT

19.12 INTRODUCTION No prescribed text

 This chapter deals with the transitional provisions between other tax Acts and the new
amendments to the Tax Administration Act.

LEARNING OUTCOMES

After you have completed this unit, you should be able to explain whether the
commission of a statutory offence before the Tax Administration Act was instituted and
repealed under this Act, can still be investigated.

Keywords: provisions, transitional, amendments.

Old taxpayer reference numbers remain and are in force until a taxpayer is provided with another
taxpayer reference number. The continuation of courts, tax boards and court rules continue in force.
SARS officials issued with a letter authorising the officials to audit under a tax Act, is still in force.
Similar rules apply to chairpersons appointed to a tax board, tax court, post, or delegation, and
conduct of inquiry and execution of search and seizure warrants.

CONCLUSION

The Tax Administration Act defines many new concepts and provides new definitions. Every
administrative requirement and procedure for the purposes of performing a duty, power or obligation
or for exercising a right in terms of a tax Act, is, to the extent of not being regulated otherwise,
regulated in terms of the Tax Administration Act.

CRITICAL THINKING

1. Are old taxpayer reference numbers issued before the enactment of the Tax Administra-
tion Act still applicable?

Yes, until SARS provides a new tax reference number.

2. May the Tax Ombud review any matter older than the time the Tax Administration Act
has been in effect?

Yes, but only upon request from the Minister of Finance.

3. Is a public officer's appointment still valid if that appointment was made before the
enactment of the Tax Administration Act?

Yes, and it will remain in force until the appointment of a new public officer.
19.13 QUESTIONS No prescribed text

Read the practical exam type questions in Learning unit 19. These questions and
solutions are provided for more information and for future studies and are not
examinable in TAX3761.

LITERATURE CONSULTED

1.Income Tax Act No. 58 of 1962

2.Tax Administration Act No. 28 of 2011

3.The South African Institute of Tax Professionals: www.thesait.org.za

4.Notes on South African Income Tax (2023)

5.South African Institute of Chartered Accountants: www.saica.co.za