Page 1109 - SAIT Compendium 2016 Volume2

MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
However, it immediately became apparent that taxpayers interpreted the section as a general mechanism to address their ‘old mistakes’ in assessments that were nal, where the taxpayer could no longer request a reduced assessment or where the objection process as well as appeals to the tax and higher courts had been exhausted. In respect of most of these matters there was no unintended tax debt the recovery of which would be inequitable. In actual fact, if most of the assessments sought to be withdrawn were given effect to, SARS would have had to pay refunds. The insertion of section 98(1)(d) was not intended as a substitute to the above procedures nor as a ‘post-appeal appeal’ remedy, including in one memorable case an attempt to reverse an adverse judgment by the Supreme Court of Appeal. The true intention was to address adverse assessments resulting from factors beyond the control of the taxpayer, for example the failure to submit a return or submission of an incorrect return by a third party under section 26 or by an employer under a tax Act, where the right of the taxpayer to object or seek an extension within the period referred to in section 104(3) has expired. This happens where a taxpayer only becomes aware of the problem after three years and can no longer object against the assessment, which has become nal. Accordingly, it is proposed that section 98(1)(d) be deleted in order to avoid the problems discussed and moved to a new section 93(1)(e), in an amended form. See the notes on paragraph 2.49 for a discussion in this regard.
2.51 Tax Administration Act, 2011: Amendment of section 99
Too many of SARS’s resources are currently spent on information entitlement disputes, as opposed to conducting the audit within the period that additional assessments, if required, may be issued. This results in insuf cient time to ensure SARS has all relevant information at its disposal to make correct assessment. In some cases, taxpayers, particularly large corporates, take more than six months to provide information required by SARS by simply failing to do so, disputing SARS’s right to obtain the information, attempting to impose conditions on access to the information and attempting to require speci c mechanisms for accessing the information. Information entitlement disputes, particularly if pursued in the High Court, can take more than one year to resolve. These failures to provide information or information entitlement disputes are often tactical or even vexatious, given the fact that taxpayers are very much aware of the period within which SARS must nalise the audit and issue additional assessments, if required. Information entitlement disputes based on often convoluted or strained interpretations of the relevant provisions of the Tax Administration Act, have led to legislative changes over the past few years. As an example last year the Tax Administration Laws Amendment Act, 2014, had to clarify that a taxpayer cannot unilaterally decide the relevance of ‘relevant material’ and refuse to even show it to SARS. Additionally, some matters subject to audit may be so complex that it is impossible to meet the prescription deadline, particularly in the context of audits requiring SARS to consider the application of a general anti-avoidance rule (GAAR), or transfer pricing audits. Transfer pricing audits are fundamental to counteracting the erosion of the South African tax base and the shifting of pro ts to other jurisdictions—generally referred to as BEPS. It is, therefore proposed that prescription be extended, by prior notice of at least 30 days to the taxpayer, by a period appropriate to a delay arising from:
• failure by a taxpayer to provide all the relevant material requested within the period under section 46(1) or the extended
period under section 46(5);
• resolving information entitlement disputes, including all legal proceedings.
Furthermore, the Commissioner may also, by prior notice of at least 60 days to the taxpayer, extend prescription by three years in the case of assessment by SARS and two years in the case of self-assessment where the audit or investigation relates to:
• the application of the doctrine of substance over form;
• the application of the GAAR (Part IIA of Chapter III of the Income Tax Act, 1962, section 73 of the Value-Added Tax Act, 1991, or any other general anti-avoidance provision under a tax Act);
• the taxation of hybrid entities or instruments;
• transfer pricing matters (section 31 of the Income Tax Act, 1962).
The extension must take place before the existing prescription period has come to an end. The requirement of prior notice before extension of prescription is to allow the taxpayer to make representations why it should not be extended. The grounds for the extension will be included to demonstrate that the jurisdictional requirements for the extension have been met.
2.52 Tax Administration Act, 2011: Amendment of section 105
The current wording of section 105 creates the impression that a dispute rising under Chapter 9 may either be heard by the tax court or a High Court for review. This section is intended to ensure that internal remedies, such as the objection and appeal process and the resolution thereof by means of alternative dispute resolution or before the tax board or the tax court, be exhausted before a higher court is approached and that the tax court deal with the dispute as court of rst instance on a trial basis. This is in line with both domestic and international case law. The proposed amendment makes the intention clear but preserves the right of a High Court to direct otherwise should the speci c circumstances of a case require it.
2.53 Tax Administration Act, 2011: Amendment of section 111
The proposed amendment aligns this provision with similar requirements for members of the tax court under section 120(2). There is no apparent rationale for the differentiation between the members of the tax court under section 120(2) and persons appointed as chairpersons of the tax board.
2.54 Tax Administration Act, 2011: Amendment of section 135
The Supreme Court Act, 1959 (Act No. 59 of 1959), was repealed by the Superior Courts Act, 2013 (Act No. 10 of 2013). Section 135(3) refers to section 21 of the repealed Supreme Court Act. The right to appeal is now regulated by section 17 of the Superior Courts Act, 2013, and the proposed amendment inserts the correct reference.
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