TAX3704_EXAM NOV 2020.

TAX3704 - Tax Administration. A bogus financier was convicted of a tax offence in respect of a tax evasion scheme he had devised in his capacity as a financial advisor. SARS is of the opinion that it needs to advise the public of the ambit of the offence and to warn taxpayers of the consequences of participating in tax evasion schemes. A junior SARS official approaches you to enquire whether SARS may publish any particulars of the offence and under what circumstances it may do so. REQUIRED: MARKS a. Inform the junior SARS official under what circumstances SARS may publish information concerning a tax offence. 2 b. Advise SARS what information may be specified/published in respect of the offence. 3 PART B (10 marks, 12 minutes) According to the Tax Administration Act, SARS may select a person for inspection, verification or audit on any basis, including on a random or risk-assessment basis. You have studied the judgment of the court in the case of Gaertner & Others v Minister of Finance & Others [2013] ZAWCHC 54. You were approached by Fred Mackenzie, a senior director of Africa Delicacies (Pty) Ltd to enquire about the information-gathering powers of the Commissioner for SARS. SARS sanctions a field audit of Africa Delicacies (Pty) Ltd’s business. REQUIRED: MARKS a. Explain to Fred Mackenzie what powers are granted to a SARS official under a warrant. 6 b. Describe what reasonable assistance a director of Africa Delicacies (Pty) Ltd, on whose premises an audit or criminal investigation is carried out, must provide to a SARS official and what costs may be recovered from SARS in this regard. 4 PART C (5 marks, 6 minutes) You have recently relocated to your small business’s main operations in Johannesburg from Grahamstown to be closer to your main client Plansnet Ltd. Your tax advisor’s offices in Grahamstown were recently flooded and most of your documents were lost. You have submitted your tax return to SARS and have been requested to submit proof of expenditure. As you are aware, all documentation was lost during the storm. REQUIRED: MARKS a. Describe what you would do under the surrounding circumstances as a possible alternative to finalise the request for relevant material matter. 5 This study source was downloaded by from CourseH on :41:23 GMT -06:00 This study resource was shared via CourseH 8 TAX3704 Oct / Nov 2020 QUESTION 4 (22 marks, 27 minutes) PART A (10 marks, 12 minutes) George Lavender, one of your clients, owns a medium-sized business called Phantom Shades. The business currently has a negative cash flow, but it has the potential to develop into a successful business with the right kind of management. The business owes SARS about R12 million in outstanding taxes. George is concerned that SARS may liquidate the business, if the outstanding tax debt is not settled soon. REQUIRED: MARKS a. Describe to George the remedies available under the Tax Administration Act to keep his business from being liquidated in respect of an outstanding tax debt. 5 b. How should a tax practitioner manage their relationships with their clients regarding their tax services. 5 PART B (12 marks, 14 minutes) The Tax Administration Act draws a distinction between a temporary and a permanent write-off of outstanding taxes. A temporary write off is a debt relief provided for in the Act. The tax debt must be uneconomical to pursue and does not absolve the taxpayer from paying an outstanding tax liability. A tax debt will be uneconomical to pursue if a senior SARS official is satisfied that the total cost of recovery of the tax debt will exceed the anticipated amount to be recovered. Mr Swart’s business suffers from a deficiency of funds and he approaches SARS with a view of writing off a part of the outstanding tax liability. Your assistance is required by one of the attorneys Mr Swart had consulted with, prior to the request for a write off. REQUIRED: MARKS a. Describe the factors that must be considered by SARS when deciding to temporarily write off an outstanding tax liability as per the Tax Administration Act. 8 b. Describe the two (2) types of administrative penalties for noncompliance with a tax Act imposed in terms of the Tax Administration Act. 2 c. What exceptional circumstances would SARS consider for the remittance of an administrative penalty?