Page 1102 - SAIT Compendium 2016 Volume2

MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
1. PURPOSE OF BILL
The Bill proposes to amend the Income Tax Act, 1962, the Customs and Excise Act, 1964, the Excise Duty Act, 1964, the Value-Added Tax Act, 1991, the Skills Development Levies Act, 1999, the Taxation Laws Second Amendment Act, 2008, the Mineral and Petroleum Resources Royalty (Administration) Act, 2008, the Tax Administration Act, 2011, the Customs Duty Act, 2014, the Customs Control Act 2014 and the Tax Administration Laws Amendment Act, 2014.
2. OBJECTS OF BILL
2.1 Income Tax Act, 1962: Amendment of section 3
2.1.1 International research done as part of the study on the transition to income tax self-assessment, con rms that the international trend is to move away from administrative income tax assessment towards self-assessment and voluntary compliance. According to the 2015 OECD comparative information series, just over half of the 56 revenue bodies surveyed, con rmed that their PIT system is designed and based on self-assessment principles. Various developed countries (e.g. Australia, New Zealand, Canada, UK and USA) and developing countries (e.g. Brazil and Chile) have already successfully implemented an income tax system based on self-assessment and voluntary compliance. Some African countries that have adopted self-assessment systems are Zambia, Nigeria, Kenia and Malawi.
2.1.2 The countries that have replaced administrative assessment procedures with self-assessment systems have done so with the objective of improving revenue performance through better compliance and more ef cient administration. The added bene t of a move to selfassessment is the reduction of compliance costs to help promote business sector growth.
2.1.3 Various developments in the South African tax administration system have already taken place which effectively brought South Africa to the point where it, in practice, has a system of self-assessment. Examples of these reforms are the automatic processing of tax returns submitted by taxpayers, the introduction of a system of advance tax rulings, a new dispute resolution process and a revised penalty regime for administrative non-compliance. Hence, to a great extent the South African income tax assessment system may already be regarded as a self-assessment system based upon voluntary compliance.
2.1.4 However, it has also become clear that the legislative framework of South Africa’s income tax self-assessment system still contains remnants of administrative assessment. These remnants include the various discretionary powers to be exercised by the Commissioner in the context of assessment contained in the Income Tax Act. To formalise income tax self-assessment in South Africa, thereby complying with international best practice, the remnants of administrative assessment must be removed.
2.2 Income Tax Act, 1962: Amendment of section 35A
2.2.1 This amendment seeks to resolve an impasse under the current wording of section 35A where the non-resident does not submit a return. For example:
Mr. X (non-resident seller) sells his property in Hermanus in July 2015. SARS determines that R50 000 ‘advance’ payment must be made in terms of section 35A, which Mr. X then pays into SARS’s bank account. The payment is allocated to the provisional account of Mr. X. The legislation requires that the amount withheld from any payment to the seller, Mr. X, is an advance in respect of his liability for normal tax for the year of assessment during which that property is disposed of by him. However, Mr.
X does not submit a return for that year. Accordingly, the amount stays in the provisional account as section 35A is silent on what happens to this amount if no return is submitted.
2.2.2 In practice, this apparently happens in the majority of such transactions. Accordingly, amendments are proposed to provide that if the seller does not submit a return within 12 months after the end of the year of assessment, the payment of that amount is deemed to be a self-assessment in terms of section 95(3) of the Tax Administration Act, 2011.
2.3 Income Tax Act, 1962: Amendment of section 61
Section 61 provides that, for the purposes of donations tax, the reference in section 96(2) to the taxable income of any deceased person shall be deemed to include a reference to the value of property disposed of by such person under any donation. Section 96(2) has been repealed and incorporated in the provisions of section 160(1) of the Tax Administration Act, 2011, hence this section is now redundant.
2.4 Income Tax Act, 1962: Amendment of section 64K
The proposed amendment to section 64K(1A)(b) provides that recipients of foreign dividends, paid by foreign companies, that are exempt from dividends tax need not submit a return.
2.5 Income Tax Act, 1962: Amendment of heading of Fourth Schedule
The Fourth Schedule only applies to withholding in respect of normal tax and the wording of the heading should re ect that. Section 89bis was repealed by paragraph 6 of Schedule 1 to the Tax Administration Act, 2011, and thus the reference to it is redundant. The Fourth Schedule is directly connected to section 5, which imposes normal tax.
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