The promulgation of the Tax Administration Bill is set to have serious and significant ramifications for taxpayers in South Africa with the South African Revenue Service (SARS) soon to be granted the power to search and seize relevant material without the need for a warrant.
According to Dr Beric Croome, Tax Executive at ENS, the Bill is expected to come into effect within the next four to six weeks.
"While we do expect the Bill to be promulgated soon, the question remains as to whether SARS is ready from an operational perspective to implement all of these changes. As a result, it is likely that certain parts of the legislation will take effect on different dates as it will be extremely difficult to implement all of it immediately."
He says that one of the most significant and controversial elements of the new Bill is the provision of Search and Seize powers that will be granted to SARS, enabling it to have the power to search and seize suspect materials without a warrant.
"SARS has a duty to uphold the tax laws of South Africa. Previously, if serious tax evasion was identified during a SARS audit, there was no power to seize documents which would have assisted SARS immediately, with the result that the evidence was likely to disappear by the time a warrant was eventually granted."
Croome says that while the new powers are expected to assist SARS in carrying out its duties, there is also a concern about the possibility of abuse of this power.
"There was a proposal that any documents that are seized by SARS without a warrant should then be given to the Court, which would then determine whether access to these documents should be granted; however, this was not accepted."
He notes that while these new powers are controversial, the establishment of a Tax Ombud in the new Bill is a positive move.
"We welcome the appointment of an Ombud to deal with tax affairs; however for this to be successful the appointment will be critical. The Tax Ombud must have a good background in both customer service and law."
He says the fact that the Tax Ombud will also be accountable to the Minister of Finance, not the Commissioner, should also help to alleviate concerns.
"This is similar to the model that has been adopted in Canada and the UK and should help to create a level of independence. The Tax Ombud will be paid out of SARS’ budget, which has been criticized, but it is a step in the right direction."
Ernie Lai King, Director at ENS, also said that the value or success of the Ombud will depend heavily on the character of the appointment.
"Hopefully this appointment will assist in the process of dealing with disputes arising from tax issues and not prove to be yet another layer of administration."