Source: Evan Pickworth (BusinessDay live)
OPEN-ended fishing expeditions by the South African Revenue Service (SARS) could come under attack as court actions begin to mushroom against tax assessments in South Africa, a tax conference heard on Wednesday.
A concern is that small businesses could be left in the lurch due to the high costs of advice and assistance where SARS gets it wrong.
Taxpayers were advised to carefully read audit letters issued to them to ensure the requirement to “give adequate reasons” had been complied with. A new format of return is being introduced by SARS this month, called an enhanced income tax return for companies, which is aimed at modernising company tax and improving efficiency.
SARS received powers in the new Tax Administration Act (TAA) to search and seize without warrants in some instances, but the courts have already moved to limit this right by balancing it against the right to privacy and dignity contained in the Customs and Excise Act.
“The opportunity is there for you to revisit what they (SARS) have done in an audit through the new letter-of-findings process in the TAA, how they have done it, and to give you an opportunity to show them if they are wrong, why they are wrong and that they have to take into account all relevant facts and law,” international tax attorney Prof Daniel Erasmus said at the South African Institute of Tax Practitioners conference held in Sandton on Wednesday.
Prof Erasmus said the new tax ombudsman, the SARS Service Monitoring Office or appropriate tax litigation insurance could help small businesses, but engagement between SARS and the industry to discuss “frustrations” was necessary.
“There appears to be a strong emphasis on collecting money whereas taxpayers in the audience are expressing a breakdown in communication and frustrations,” Prof Erasmus said.
His advice was to “give what you absolutely have to after receiving adequate reasons for an audit” and to engage with SARS auditors.
Prof Erasmus said Australia was taking action to improve relations between the tax office and taxpayers, and South Africa should look to the country as an example. “In Australia there will be meetings with big business to find out what has gone wrong in the relationship. The tax office is prepared to address this as the relationship is important for compliance.”
“The trend is clearly for increased audits, with a big focus on collections,” KPMG corporate tax director Muhammad Saloojee said.
“New (tax) forms are probably to be welcomed as they should improve disclosure,” KPMG associate director Lesley Isherwood said.