In the course of carrying out their mandate of assessing and collecting taxes owed to the government, the South African Revenue Services (SARS) frequently has to request “relevant material” from taxpayers. Currently, relevant material is defined as “any information, document or thing that is foreseeably relevant for the administration of a tax Act…”
This definition, however, has caused practical challenges for SARS. It has been stated that when a request for the material is made, many taxpayers have refused, claiming the requested material is not relevant for the administration of a tax Act. In an attempt to address this issue, an amendment to the definition was proposed in the 2014 draft Tax Administration Laws Amendment Bill (“TALAB”). The proposed meaning of relevant material reads “any information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act”.
In the presentations to the Standing Committee on Finance (SCoF), Lesedi Seforo, Technical Advisor at the South African Institute of Tax Professionals (‘SAIT’), submitted that the proposed change gives SARS the power to unilaterally determine what is relevant, thus overriding the taxpayer‘s ability to question the relevance of information requested by SARS and potentially leading to an abuse of their power. This contention was, however, rejected, stating that there are other remedies available to taxpayers should they wish to challenge SARS’ request for the material on the basis of relevance. It was further held that the international literature on this subject shows that the test for what is foreseeably relevant has a fairly low threshold.
Relevant material is also connected to what is commonly known as a tax clearance certificate (“TCC”). Currently, a taxpayer who applies for a TCC will receive one unless there is an outstanding tax return or debt. The TALAB, however, sought to add an additional hurdle that would have to be cleared by taxpayers in order to obtain a TCC: if there was a request from SARS for the taxpayer to provide relevant material and the taxpayer has not done so without just cause for the delay, then that person will not be issued with the tax clearance certificate. It was submitted to the SCoF that there are numerous scenarios that can present themselves to reflect a request for relevant material as being outstanding, thereby jeopardising the taxpayer‘s financial position due to inability to obtain the TCC. Fortunately this submission was accepted by the National Treasury after consultation with the SCoF. “I believe this was the right call by National Treasury”, adds Seforo. “The downside, however, is that the issue will be revisited again during the 2015 legislative cycle. The battle may have been won, but the war is far from over” he reiterates.