Page 1111 - SAIT Compendium 2016 Volume2

MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
thereof. In view of the high incidence of refund fraud, in particular the payment of refunds of relatively small amounts that fall under SARS’s ‘stopper’ threshold as well as VAT refunds generated by ctitious transactions or in ated input tax claims, there is a clear and pressing need to preserve the arrangement between the banks and SARS. The preservation of the account is of particular importance in view of the practice to dissipate or transfer the amounts to various other accounts or the withdrawal thereof as soon as or shortly after the fraudulent refunds are deposited. As a result of the possibility that the Protection of Personal Information Act, 2013 (POPI), now supersedes or limits the common law reporting duty of banks, the potential exposure by banks to claims by clients for damages resulting from the temporary ‘freezing’ of accounts and the disclosure of personal information to SARS potentially contrary to POPI, this amendment will ensure that such preservation will be lawful and the reporting by banks to SARS will remain lawful and not subject to criminal sanctions under POPI. Although it is not absolutely clear that POPI supersedes or limits the common law reporting duty of banks, it is submitted that the proposed amendment is necessary to ensure certainty in this regard. The Financial Intelligence Centre Act, 2001 (FICA), imposes a reporting duty on banks of certain suspicious transactions to the FIC. Currently, section 29(1)(b)(i) of FICA imposes a reporting duty in respect of a transaction that ‘may be relevant to the investigation of an evasion or attempted evasion of a duty to pay any tax, duty or levy imposed by legislation administered by the Commissioner for the South African Revenue Service’. It is not clear that these provisions cover the reporting of fraudulent tax refunds and it is similarly submitted that the proposed amendment is necessary to ensure certainty in this regard. Hence the proposed amendment provides that where the Bank reasonably suspects that the payment of an amount is related to a tax offence, which includes fraudulent tax refunds by de nition, the Bank must immediately report the suspicion to SARS and if so instructed by SARS not proceed to carry out any transaction in respect of the amount for a period not exceeding two business days, unless SARS or a High Court directs otherwise or SARS issues a notice under section 179.
Ad para (e): The refusal of a refund under an assessment referred to in section 1(a) involves many factors, calculations and other aspects of determining the amount of tax or a refund. Accordingly, the whole of such assessment must be disputed under the general objection provision in section 104, and not just the decision not to authorise a refund. The amendment clari es that the remedy under subsection (6) only applies to a decision not to refund an amount erroneously paid in respect of an assessment.
2.61 Tax Administration Act, 2011: Amendment of section 191
The proposed amendment is a technical correction to correct the spelling of ‘write off’. Furthermore, the proposed amendment inserts a new de ned term ‘customs and excise legislation’.
2.62 Tax Administration Act, 2011: Amendment of section 212
A proposed amendment to section 34 aims to include any person who is a party to an arrangement listed in a public notice by the Commissioner in terms of section 35(2) in the de nition of a participant thereby imposing a reporting obligation on such persons. As this is a third party reporting obligation, i.e. these persons do not directly or indirectly derive or are assumed to derive a tax bene t or a nancial bene t by virtue of an arrangement, it would be unreasonable to subject them to the stricter reportable arrangement penalties contained in section 212(1) and (2). Hence the new subsection (3) inserts a separate penalty provision for this category of persons.
2.63 Tax Administration Act, 2011: Amendment of section 213
The proposed amendment is a technical correction to cater for a noncompliance penalty imposable under a tax Act other than the Tax Administration Act.
2.64 Tax Administration Act, 2011: Amendment of section 225
The amendment proposes an amendment to the de nition of ‘default’, by linking it to the de nition of ‘understatement’ that in essence covers the current criteria in the de nition of ‘default’.
2.65 Tax Administration Act, 2011: Amendment of section 226
The proposed amendment provides that an audit, unrelated to the default being disclosed by an applicant, will not disqualify an applicant for full voluntary disclosure relief. As an example, an audit of a taxpayer related to a PAYE issue is in progress. The same taxpayer may wish to submit a disclosure for an amount of VAT. There may be no correlation between these two tax issues and, as such, the enforcement action on the PAYE issue may not be a cause to restrict the relief in respect of the VAT disclosure. The proposed amendment provides that the audit or investigation must be related to the default the person seeks to disclose.
2.66 Tax Administration Act, 2011: Amendment of section 227
Currently one of the requirements for a valid voluntary disclosure is that the disclosure must involve a ‘default’ which has not previously been disclosed by the applicant. The proposed amendment now requires that the ‘default’ must not be a default that occurred within ve years of the disclosure of a similar ‘default’ by the applicant, thereby widening the scope of the voluntary disclosure regime. Furthermore, the potential imposition of an understatement penalty as a requirement for a valid voluntary disclosure has been interpreted by SARS as meaning that in the absence of voluntary disclosure relief, an understatement penalty would be leviable. On this interpretation, a bona de inadvertent error as contemplated in section 222(1) does not qualify for voluntary disclosure relief. A default that does not constitute a substantial understatement and where the other behaviours contemplated in section 223 are also not present would also not qualify for voluntary disclosure relief, notwithstanding that SARS may take a contrary view with regard to the assessment of the relevant behaviour. The proposed amendment aims to resolve this issue by amending the requirement to rather refer to the behaviour in Column 2 of the understatement penalty percentage table in section 223, as opposed to involving the potential imposition of an understatement penalty in respect of the ‘default’.
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