The South African Revenue Service (SARS) takes a zero-tolerance approach to non-compliance and consistently enforces the law whether it’s an intentional or negligent taxpayer.
Tax experts from Tax Consulting SA said the high standard of compliance is applied indiscriminately to the average taxpayer, high net worth individuals and even local celebrities, with SARS Commissioner Edward Kieswetter stating that the entity aims to balance the trade balance. between tax administration and risk management.
So if a taxpayer is on the wrong side of SARS, it’s best to follow the rules of procedure.
According to Tax Consulting SA, it is an advantage to be the first to start looking for the right tax advice.
“This ensures that the necessary steps are taken to protect both you and your company from paying for the sins of ignorance or rectifying what can be attributed to simple human error,” said Tax Consulting SA.
“But where things go wrong, SARS must be legally engaged and we usually like it best if a correct tax strategy is followed.”
One of the most common situations where a taxpayer may have to toy with SARS is when a taxpayer chooses to challenge a “decision” by filing with the Supreme Court for review.
Through a recent amendment to the Tax Administration Act, the government has made it clear that a SARS “decision” can only be challenged under the objection and appeal procedures provided for in the TAA.
A recent lesson on the importance of following due process as stated in tax law was enforced in the recent Supreme Court case of United Manganese of Kalahari v Commissioner for SARS (The UMK case) and the Commissioner for the SARS v Rappa Resources (the Rappa case).
Tax Consulting SA said there is a time and place for everything, but not when it comes to complying with the letter of the law as contained in the Tax Authorities Act.
Facts
In the UMK case, SARS issued an audit letter to UMK.
“Based on the complexity of addressing the audit, SARS has granted UMK a reprieve to address the concerns raised in the audit letter. The audit was then completed months later, with additional assessments for 2011, 2012 and 2013 years of assessment, totaling R351 million,” the law firm said.
Rather than launch a dispute against these attacks, UMK has opted to notify SARS of its intention to initiate legal proceedings in the Gauteng High Court – including seeking an annulment order of additional assessments.
The Court held that under section 105 of the TAA, provision has been made for a Supreme Court to hear a dispute over an assessment or decision only if the Supreme Court so directs.
“In this case, it is common knowledge that no preliminary instruction has been given by the Supreme Court; therefore the court lacks the necessary jurisdiction to take cognizance of the merits of the additional tax assessment,” said the law firm.
According to Tax Consulting SA, this position was supported by the Rappa case.
The only variation here was in the facts, where Rappa made an urgent application to the Gauteng Division of the High Court, Johannesburg, to have the “decision” in the issuance of the supplementary assessments overturned
Read: SARS is after these wealthy taxpayers and corporations
