TAX3704_ PORTFOLIO ASSIGNMENT 2 2021.

TAX3704_ PORTFOLIO ASSIGNMENT 2 2021. Tax Administration. On 28 October 2014, the South African Revenue Service (SARS) released a guide on the rules promulgated in terms of section 103 of the Tax Administration Act No. 28 of 2011 (the TAA) dealing with the resolution of disputes in South Africa. The new Rules prescribe the procedures to be followed in respect of objections and appeals in respect of assessments or certain administrative decisions by SARS. The new Rules also deal with procedures to be followed in respect of alternative dispute resolution and various other issues relating to the Tax Court. Rules for dispute resolution: s103. (1) The Minister may, after consultation with the Minister of Justice and Constitutional Development, by public notice make ‘rules’ governing the procedures to lodge an objection and appeal against an assessment or ‘decision’, and the conduct and hearing of an appeal before a tax board or tax court. (2) The ‘rules’ may provide for alternative dispute resolution procedures under which SARS and the person aggrieved by an assessment or ‘decision’ may resolve a dispute. SARS now has 45 days to provide the taxpayer with reasons for an assessment where adequate reasons were not provided. Under the old Rules, SARS was afforded 60 days. SARS now has 60 days after the delivery of a taxpayer’s objection to notify the taxpayer of the outcome of the objection, under the old Rules, SARS was afforded 90 days. Reasons for an assessment: Section 96 of the act provides that in the case of an assessment based on an estimation or an assessment that is not fully based on a return submitted by the taxpayer, SARS must issue a statement of grounds of assessment. In terms of rule 6 of the new Rules, a taxpayer who is aggrieved by an assessment may request SARS to provide reasons for the assessment to enable the taxpayer to formulate an objection. However, where, in the opinion of a SARS official, the reasons required to enable the taxpayer to formulate an objection have not been provided, SARS must provide such reasons within 45 days after the delivery of the request for reasons. Importantly, the period for providing reasons may be extended by SARS if a SARS official is satisfied that due to exceptional circumstances, the complexity of the matter or the principle or the amount involved, additional time is required by SARS to provide reasons to the taxpayer. Objection: Rule 9 of the new Rules further provides that when a taxpayer lodges an objection, SARS is required to notify the taxpayer of the allowance or disallowance of the objection, either in whole or in part, and the basis thereof. SARS must notify the taxpayer of its decision in writing within 60 days after delivery of the taxpayer’s objection. If, however, SARS requires more time to deal with the objection due to exceptional circumstances, the complexity of the matter or the principle or the amount involved, SARS may extend the initial period by a period not exceeding 45 days. This study source was downloaded by from CourseH on :50:27 GMT -06:00 This study resource was shared via CourseH Student NR: [ASSIGNMENT 02 – TAX3704] S DU TOIT Unique Nr: 2 The Guide provides that if SARS fails to notify the taxpayer of the outcome of the objection within the prescribed period, the taxpayer may pursue a complaint within the SARS internal administrative complaints resolution process and if unsuccessful, submit a complaint to the Tax Ombud; or apply for default judgment under rule 56 of the new Rules. Exchange of pleadings: A taxpayer who lodges an appeal must deliver a notice of appeal within 30 days after SARS has delivered the notice of disallowance of the objection. In the notice of appeal, the taxpayer must specify in detail which of the grounds of objection are being taken on appeal; the grounds for disputing SARS’ basis of the decision to disallow the objection as set out in the notice of disallowance; and/or any new ground on which the taxpayer is appealing. Rule 10 of the new Rules provides that a taxpayer may add new grounds when lodging a notice of appeal. However, this rule is limited by rule 10(3) which provides that a taxpayer may not appeal on a ground that constitutes a new objection against a part or amount of the disputed assessment not objected to in the notice of objection. The taxpayer must produce any documentation requested by SARS relating to the new ground in order to decide on the further progress of the appeal. Following the taxpayer’s notice of appeal, SARS must deliver to the taxpayer a statement of grounds of assessment and opposing appeal. The Guide provides that SARS may include new grounds in its statement of assessment and opposing the appeal. Following SARS’ statement of grounds of assessment, the taxpayer may include a new ground to its statement of grounds of appeal, subject to the limitation in rule 10(3). SARS may similarly deliver a notice of discovery to the taxpayer requesting any documents material to the new ground of appeal. The taxpayer may then, in its reply to SARS’ statement of grounds of assessment, deal with any new ground of assessment and amend its statement of grounds of appeal to deal with the grounds of assessment. If the matter has been set down for hearing, rule 45(2) makes provisions for either party to seek a postponement to deal with any new ground raised by the other party. Test cases: Section 106(6) of the TAA states that if a senior SARS official considers that the determination of an objection or an appeal, whether on a question of law or question of fact or both, is likely to be determinative of all or a substantial number of issues involved in one or more other objections or appeals, the official may designate that objection or appeal as a test case; and stay the other objections or appeals by reason of the taking of a test case on a similar objection or appeal before the tax court. Rule 12(2) of the new Rules provides that a SARS official who designates an objection or appeal as a test case must provide the taxpayer with a notice informing such taxpayer of the number and common issues involved in the objections or appeals that the test case is likely to be determinative of, the questions of law or fact or both, and the importance of the test case to the administration of the relevant tax Act. In response to the notice, the taxpayer may, within 30 days of receiving the notice, oppose the decision to designate an objection or appeal as a test case or alternatively oppose the staying of an objection or appeal pending the final determination of a test case. This study source was downloaded by from CourseH on :50:27 GMT -06:00 This study resource was shared via CourseH Student NR: [ASSIGNMENT 02 – TAX3704] S DU TOIT Unique Nr: 3 QUESTION 2 The definition of a ‘taxpayer’ Tax Administration Act 28 of 2011 (hereafter the act) refers to a person who is chargeable to tax and means that the liability is directly imposed on this person in his or her personal capacity that is a representative taxpayer according to s 153 of the act, such as Joyce in our case. Further Joyce has a reporting obligation under S25 (1) to submit a tax return. A person is guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding two years if he fails or neglects to submit a return or document to SARS or to issue a document to a person as required by a tax Act. The provisions of s 249 of the Criminal Procedure Act 51 of 1977 must also be borne in mind: ‘When an accused is at criminal proceedings charged with any offence of which the failure to pay any tax or impost to the State, or of which the failure to furnish to any officer of the State any information relating to any tax or impost which is or may be due to the State is an element, the accused shall be deemed to have failed to pay such tax or impost or to furnish such information, unless the contrary is proved Tax Administration Act, 2011: Amendment of section 1Paragraph (a) and (d): The insertion of the definition of "outstanding tax debt" and proposed amendment to the definition of "tax debt" aims to clarify what is regarded as a "tax debt" and what is an "outstanding tax debt" recoverable under the Act. A "tax debt" means an amount of tax due or payable in terms of a tax Act as set out in section 169(1) of the Tax Administration Act. For example: A tax debt may be payable but not due in a situation where a tax debt is disputed, but remains payable pursuant to the pay-now-argue-later rule. However, a disputed tax debt will only be "due" if a tax court or higher court finally determines the dispute in favour of SARS. Conversely a tax debt may also be due but not payable, for example an understatement penalty. According to s3. (2a) SARS is responsible to obtain full information in relation to the obligation (iii) the obligation of a person (whether personally or on behalf of another person) to comply with a tax Act, and more particularly (d) determine the liability of a person for tax. Further s 169. (1) An amount of tax due or payable in terms of a tax Act is a tax debt due to SARS for the benefit of the National Revenue Fund. This tax debt due to SARS is recoverable by SARS and is recoverable from Joyce the representative taxpayer who is not personally liable under section 155, any assets belonging to ABS Truck Braking Systemn (Pty) Ltd, which are in the representative taxpayer’s possession or under his or her management or control; or in any other case, any assets of the taxpayer. A senior SARS official may enter into an instalment payment agreement only if— (a) the taxpayer suffers from a deficiency of assets or liquidity which is reasonably certain to be remedied in the future; (b) the taxpayer anticipates income or other receipts which can be used to satisfy the tax debt; (c) prospects of immediate collection activity are poor or uneconomical but are likely to improve in the future; (d) collection activity would be harsh in the particular case and the deferral or instalment agreement is unlikely to prejudice tax collection; or (e) the taxpayer provides the security as may be required by the official. Amendment of section 195 of Act 28 of 2011.—Section 195 of the Tax Administration Act, 2011, is hereby amended by the substitution for subsection (1) of the following subsection: This study source was downloaded by from CourseH on :50:27 GMT -06:00 This study resource was shared via CourseH Student NR: [ASSIGNMENT 02 – TAX3704] S DU TOIT Unique Nr: 4 "(1) A senior SARS official may decide to temporarily 'write off' an amount of tax debt if if satisfied that the tax debt is uneconomical to pursue as described in section 196 at that time; or (b) for the duration of the period that the 'debtor' is subject to business rescue proceedings under Chapter 6 of the 'Companies Act', as referred to in section 132 of that Act.". The proposed amendment provides that where a company is subject to a business rescue plan in terms of Chapter 6 of the Companies Act, 2008, the business rescue practitioner is required to exercise in respect of that company all the functions and assume all the responsibilities of a public officer under a tax Act for the duration of the period that the company is subject to the business rescue plan A tax debt can be written off temporarily if it is "uneconomical to pursue". "Uneconomical to pursue" means that the total cost of recovery of that tax debt is likely to exceed the anticipated amount to be recovered. In order to determine whether the cost of recovery is likely to exceed the anticipated amount to be recovered a senior SARS official must have regard to factors such as the steps that have been taken to date to recover the tax debt and the costs involved in those steps, the likely cost of continuing action to recover the tax debt and the anticipated return from that action, the financial position of the debtor, including the debtor's assets and liabilities, cash flow and possible future income streams. Where a taxpayer is engaged in business rescue proceedings SARS's recovery efforts are suspended ex lege until the business rescue proceedings are over. Consequently a tax debt tied up in this procedure cannot easily meet the test of "uneconomical to pursue" as laid out above. The term "outstanding tax debt" is used in the sections assigning recovery powers to SARS i.e. it is a prerequisite before recovery proceedings may be instituted by SARS. The proposed amendment therefore clarifies that the recovery powers can be used only if an amount of tax is not paid within the prescribed period for payment. Paragraph (b): The proposed amendment clarifies that there must be a nexus between material requested by SARS and the administration of a tax Act for purposes of which the material is required. Paragraph (c): The proposed amendment clarifies that a return by the taxpayer only constitutes one basis on which an assessment by SARS is based and not the only basis. SARS may have multiple sources of information to determine the correct tax liability of the taxpayer. These include the taxpayer's return, third party returns such as returns regarding interest received by the taxpayer, as well as information obtained by SARS under its powers to request information. These sources of information may be used to issue an original or revised assessment.