|
Analysts warn SARS not to erode taxpayers’ rights
|
|
|
Sanchia Temkim
Business Day
Thursday, July 08, 2010
|
|
|
|
The South African Revenue Service (SARS) must exercise caution and “act reasonably” before taking outstanding tax and penalties out of offending taxpayers’ bank accounts and attaching their salaries, warn tax analysts.
“The tax courts will take extreme displeasure with SARS if they should abuse their powers,” says Andrew Wellsted, a director at Deneys Reitz Tax Services. “SARS must be careful not to erode taxpayers’ rights.”
Last week SARS Commissioner Oupa Magashula sent a warning to tax offenders that SARS intended recovering amounts due from “agents” in control of taxpayers’ assets, such as banks and employers.
Despite the mailing of almost 1-million penalties and reminders to noncompliant taxpayers, “the majority of these recalcitrant taxpayers have failed to remedy their noncompliance”, says Mr Magashula.
In January, SARS issued the first round of penalty notices to about 23 000 taxpayers. SARS introduced new administrative penalties last year.
Mr Magashula says taxpayers were warned last year that SARS would make use of the provisions of the Income Tax Act to recover amounts due to SARS from agents in control of taxpayers’ assets — including debiting salaries from employers. “SARS is left with no option but to carry through on this warning.”
“Although SARS may have far-reaching powers to attach taxpayers’ monies (under the income tax laws), the courts will come to the taxpayer’s assistance if they find SARS has acted inappropriately.
“The courts will make an adverse finding against SARS,” Mr Wellsted says.
Beric Croome, a tax executive at corporate law advisers Edward Nathan Sonnenbergs, says the attachment procedure is also used by tax authorities in other democratic jurisdictions and has not been found unconstitutional by the courts.
Taxpayers think the process is unfair, Mr Croome says. “However, the problem is the conduct of taxpayers.
“An assessment is issued by SARS and many taxpayers do nothing at this stage. They need to challenge an assessment. The first time alarm bells go off is when they see a large sum of money missing from their bank account.”
Mr Croome says the attachment of money by SARS is used as a last resort.
“It is used by revenue when they have exhausted all avenues to get tax debts from offenders.” He says that taxpayers need to engage with SARS the minute an assessment is issued. “An assessment is not going to go away. In fact, there is now a beefing up of the powers of SARS with new legislation in the pipeline.”
He says that the proposed Tax Administration Bill introduces the concept of a so-called jeopardy assessment, whereby SARS will be empowered to issue assessments in advance of the date that it would normally be issued and to seize a taxpayer’s assets for up to 24 hours, while the court is approached to prevent the dissipation of assets by the taxpayer.
The new legislation strengthens the information-gathering powers of SARS, Mr Croome says.
Emil Brincker, a tax director at Cliffe Dekker Hofmeyr, says that a taxpayer may be able to claim damages from SARS where they have negligently taken money out of their bank account.
“However, a taxpayer will not be able to claim damages from their employer or bank as they acted on the mandate of SARS,” says Mr Brincker.
The employer or bank will be in breach of the tax laws if they do not comply with SARS’ instructions, he says.
Vedika Andhee, a director for tax at Ernst & Young, says it is important that SARS contact the taxpayer telephonically to communicate that there is a liability due, and make appropriate arrangements for payment. SARS should give taxpayers sufficient time in order to make their payments, says Ms Andhee. “There are huge ramifications in withdrawing funds from a taxpayer’s bank account,” she says.
“The receiver is taking money out of a bank account and placing extreme financial hardship on the taxpayer, particularly in the wake of the economic recession.
“At the end of the day communication is essential,” she says.
Further, Ms Andhee says the bank should notify the client of its instruction from SARS. “After all, it can be argued that it is acting in the interest of its customer. A bank is a service provider,” she says.
Despite numerous attempts, Business Day was unable to obtain comment from SARS by the time of going to press.
|
|
|
 Print this article |
 Send to a friend
|
|