Page 1110 - SAIT Compendium 2016 Volume2

MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
2.55 Tax Administration Act, 2011: Amendment of section 146
It is proposed that section 146(b)(ii) and (iii) be deleted in the context of settlement as the recoverability of the tax debt constitutes unnecessary criteria to determine if a settlement should be concluded. Under the pay-now-arguelater principle, the recovery of the disputed tax is separated from the pursuance of the objection and appeal. The proposed amendment follows this approach. The recoverability of the tax debt rather relates to debt write-off.
2.56 Tax Administration Act, 2011: Amendment of section 177
The proposed amendment aligns section 177 with the institution of other High Court proceedings and impactful recovery proceedings e.g. sections 163, 179, 185 and 186, which proceedings require the authorisation of senior SARS of cials.
2.57 Tax Administration Act, 2011: Amendment of section 179
Ad para (a): Section 179 provides that SARS may by notice to a person who holds or owes (or will hold or owe) money for or to a taxpayer, require that person to pay the money to SARS in satisfaction of the taxpayer’s tax debt. The current wording requires a senior SARS of cial to issue notices of third party appointments (Form AA88). In line with other amendments proposed in this Bill, it is proposed that the senior SARS of cial approve the issue of the notices. In view of SARS’s substantial debt book, the issue of these notices may be automated. The proposed amendment will make it clear that if a senior SARS of cial has approved the system criteria for issuing the notices their issue may be automated. This only occurs under prescribed circumstances, in particular where there is an outstanding tax debt and letters of demand have been issued.
Ad para (b): The proposed amendment provides that SARS may only issue the notice after delivery to the tax debtor of:
• A nal demand for payment which must be delivered at the latest 10 business days before the issue of the notice. The letter of demand must set out all the recovery steps that SARS may take if the tax debt is not paid and the available debt relief mechanisms under the Act; and
• Where the recovery steps relate to section 179 the notice must in addition also set out the following:
o if the tax debtor is a natural person, that the tax debtor may within ve business days of receiving the demand apply to SARS for a reduction of the amount to be paid to SARS based on the basic living expenses of the tax
debtor and his or her dependants; and
o if the tax debtor is not a natural person, that the tax debtor may within ve business days of receiving the demand
apply to SARS for a reduction of the amount to be paid to SARS based on serious nancial hardship.
SARS need not issue a demand in terms of this section if a senior SARS of cial is satis ed that to do so would prejudice the collection of the tax debt.
2.58 Tax Administration Act, 2011: Amendment of section 185
This proposed amendment clari es that the senior SARS of cial referred to in section 185 only needs to authorise the application while the execution thereof can be done by a person referred to in section 6(4) of the Tax Administration Act.
2.59 Tax Administration Act, 2011: Amendment of section 187
Ad para (a): The proposed amendment is a technical correction to clarify that interest accrues and is also payable.
Ad para (b): Under section 190(5) a refund paid by SARS which was not properly payable, for example as a result of fraud, is regarded as an outstanding tax debt summarily recoverable by SARS. As with any other tax debt, interest must also accrue and be payable on this amount in respect of the time taken to recover the amount of the refund not properly payable. This requires an effective date under section 187(3) from which date the interest will accrue.
Ad para (c): The right to request interest remittance cannot be open ended or nality will never be achieved. This limitation did apply in terms of repealed provisions of some of the tax Acts other than the Tax Administration Act.
2.60 Tax Administration Act, 2011: Amendment of section 190
Ad para (a): The proposed amendment clari es that a taxpayer is entitled to a refund and interest thereon as provided for in a tax Act.
Ad para (b): The current wording of section 190(4) leads to the perception that a taxpayer must, in addition, also claim an assessed refund, and that the taxpayer then only has 3 years for an administrative assessment or 5 years for self- assessment, within which to claim the refund. Paragraph (b) of subsection (1) was incorrectly deleted as the limitation periods only apply where an erroneous overpayment of tax was made. A refund properly refundable and payable under a tax Act in terms of section 190(1)(a) must be paid by SARS and there is no limitation period for such payment. The wording is further amended to provide where a refund of an amount erroneously paid in respect of an assessment in excess of the amount payable in terms of the assessment, is not paid within this period, it is regarded as a payment to the National Revenue Fund, as is the case with any other claim that has prescribed and may be regarded as a nal payment. The requirement to ‘claim’ the refund in terms of the previous wording is thus removed. The proposed amendment further provides that the refund must be made within three years (assessments by SARS) or ve years (self-assessment) from the later of the date of the assessment or the erroneous payment so as to not prejudice taxpayers aiming to claim a refund of an amount where the payment made in respect of an assessment is made before the date of such assessment.
Ad para (c): The proposed amendment clari es that interest accrues and is payable on the amount of a refund that was not properly payable from the date of such payment.
Ad para (d): SARS and banks have an arrangement whereby banks report suspicious refunds to SARS. This is pursuant to a bank’s common law duty to report suspected fraud through the use of bank accounts. Under this arrangement, the banks agreed to hold the funds for a short period to allow SARS to investigate the circumstances around the refund. If the refund is false, SARS recovers the refund directly from the bank by appointing the bank as a responsible third party under section 179 as the amount under section 190(5) is regarded as an outstanding tax debt from the date of payment
1102 SAIT CompendIum oF TAx LegISLATIon VoLume 2