TAX3704 Assignment 2 Memo.

TAX3704 Assignment 2 Memo. Tax Administration. SARS is mandated to collect tax revenues owing by a taxpayer in terms of an assessment. Although there are various remedies that the taxpayer can follow if they disagree with the assessment, SARS may require the taxpayer to pay the amount claimed by SARS regardless of the disagreement by the taxpayer. This stance is supported by the "pay now, argue later” principle where the payment of tax is not suspended pending an objection or an appeal, unless directed otherwise. The "pay now argue later” principle was dealt with in the case of Metcash Trading Ltd v Commissioner, South African Revenue Service [2000] 62 SATC 84. In this case, the legality of the concept survived scrutiny by the Constitutional Court in the context of Value-Added Tax (VAT) when a taxpayer sought to challenge the VAT legislation contending it to be incompatible with section 34 of the Bill of Rights, namely the section that guarantees access to courts. The Constitutional Court upheld the pay-now, argue-later principle. Required: Part A: Discuss why SARS may enforce the ‘pay now argue later’ principle? (5 Marks) SARS is entitled to collect amounts owing by a taxpayer in terms of an assessment (1). The considerations include the public interest (1); obtaining full and speedy settlement of tax debts (1) and the need to limit the ability of obstinate taxpayers to use objection and appeal procedures (1) strategically to defer payment of their taxes (1). Any other valid point. Part B: Discuss SARS’ ability to enforce the ‘pay now argue later’ principle? (20 Marks) SARS’ ability (powers) to collect a tax debt from taxpayers has been incorporated into the Tax Administration Act in various parts and sections. These are some of the provisions expected to be discussed by the students in answering this part of the question: In terms of section 179(1) of the TAA (1), a senior SARS official may require third parties who hold money of a taxpayer (1), for example a pension or a salary, to pay the money to SARS (1) if the owner of the money has tax debts (1). If the third party parts with the money contrary to the notice, section 179(3) stipulates that a party becomes personally liable for the money (1). The payment by a third party, for example the taxpayer’s bank to SARS in terms of section 179 of the TAA, does not arise from the debt owed by the debtor (1), but because of the obligation that this section places on the bank compelling them to satisfy the debt of the taxpayer (1). Section 179 of the TAA only applies to amounts of money owed to (1) or held on behalf of a taxpayer (1). Thus if the nature of the relationship between the bank and taxpayer is that the bank owes the taxpayer money or holds such money invariably the bank would have to comply with the payment instruction in section 179(3) of the TAA. Jeopardy assessments (as provided in section 94 of the TAA) (1), also known as protective assessments, may be issued in advance of the date on which the return is normally due (1). This is to secure the early collection of tax that would otherwise be in jeopardy (1) or where there is some danger of tax being lost by delay (1). This study source was downloaded by from CourseH on :00:45 GMT -06:00 This study resource was shared via CourseH TAX3704_S2_2018: Assignment 2 Memo Page 2 of 4 Apply for civil judgment under section 172 of the TAA (1) if a person fails to pay tax when it is legally payable to SARS (1). SARS may file the statement with the clerk or registrar of a competent court (1) regardless of whether or not the amount is subject to an objection or appeal under chapter 9 of the TAA (1). SARS may institute sequestration or liquidation proceedings under s177 of the TAA (1). Liquidation or sequestration proceedings may be instituted whether or not the taxpayer is present in the Republic (1) or has assets in the Republic (1). However, the proceedings may only be instituted with an order of the court (1). Students must also discuss these sections of the TAA (up to 3 marks per section discussed not just copied): Section 164(4) & 164(5) of the TAA, Section 180 of the TAA (2), Section 181 of the TAA (3); Section 182 of the TAA (2); section 186, section 210 to 214 of the TAA, section 234 of the TAA Any other valid point. Part C: [How can the taxpayer respond to SARS, should this principle be enforced against them?] (5 Marks) In terms of section 164 (2) of the TAA (1), a taxpayer may request a suspension of the obligation to pay (1) an amount of tax or a portion thereof under an assessment where the taxpayer disputes (1) or intends to dispute the liability to pay that tax (1) under the dispute resolution provisions contained in Chapter 9 of the TAA (1). The taxpayer may also pay the assessed tax liability before undertaking the dispute resolution process (1). Or may pledge assets as security (1) The taxpayer may enter into an instalment payment arrangement with SARS (1). Any other valid point. Part D: GB Mining approaches you to advise them on the rules for good record keeping purposes and what records they need to protect and keep record of and to whom such a duty extends. [10] Answer Discussion of section 29 to 32 of the Tax Administration Act: • A person is required to keep proper records, books of accounts or documents that will enable a per-son or taxpayer to observe the requirements of the Tax Administration Act, as well as any other Tax Act. (3) • VAT records (1) • Employer records (1) • Employee tax (1) • UIF (1) • Skills development levies (1) This study source was downloaded by from CourseH on :00:45 GMT -06:00 This study resource was shared via CourseH TAX3704_S2_2018: Assignment 2 Memo Page 3 of 4 • A duty to keep records extends to a person who filed a return; those who should have filed a return but have failed to do so (2) Any other valid point. Part E: Under what circumstances will a taxpayer seek a compromise arrangement with regard to their tax debt and how to go about it? (7 marks)