Would you know if your fundamental rights are being violated when the South African Revenue Service (SARS) is on your case? The answer is probably no. Which is why Prof and Dr Daniel N Erasmus, an international tax attorney who holds a PhD in tax and constitutional law, gives you the lowdown on taxpayers’ rights under our Constitution.
The umbrella of Constitutional rights
Our Constitution is the supreme law of the land. South Africa’s is one of the most progressive in the world and enjoys high acclaim internationally. ALL laws are subject to the Constitution and the Rule of Law.
Therefore, any conduct that is inconsistent with the Constitution is deemed to be invalid. Some of the key constitutional features and principles are included in other Acts such as:
- The Promotion of Access to Information Act (PAIA)
- The Promotion of Administrative Justice Act (PAJA)
When it comes to tax issues
The application of the Tax Administration Act (TAA) really governs the interaction between the taxpayer and SARS.
- The Right to privacy
Section 14 of the Constitution deals with the right to privacy which includes the right not to have your person, home or property searched; your possessions seized or privacy of your communication infringed.
So, before SARS pulls the trigger to do any kind of invasive search or seizing of possessions, they must jump through some tricky, but constitutionally important, hoops. If you ever are the subject of a search and seizure or anticipate that this might happen, it would be a very good idea to obtain expert legal advice.
- The Right to not incriminate yourself
Typically, in a SARS investigation, they are looking to see whether or not you have complied with the tax provisions and to what extent. Whether SARS believe a violation to be negligence or intentional, there are almost always penalties applicable to the taxpayer. When there are large sums of money involved, SARS may actually try to take matters a step further and press criminal charges against the taxpayer or a representative of the company or the entity they are investigating.
The question is: To what extent is SARS allowed to do that? Once again it is very important to have a legal expert covering your back. Unfortunately, SARS tend to use the criminal charge whip in larger audits as a means of threatening the taxpayers to encourage compliance.
It is important to know that there are restrictions on information SARS can use to determine your taxes and potential penalties. They cannot automatically use information gathered for taxes and potential penalties (ie for civil purposes) in a criminal charge.
If SARS chooses to use this information as evidence to pursue criminal charges, there are provisions in the Constitution that determine that if the use of such evidence would result in an unfair trial, the Court has the power to exclude that evidence.
- The Right to access to information
Information held by the State is subject to the Promotion of Access to Information Act (PAIA) which contains detailed rules as to how SARS is allowed to obtain the information. It is important that taxpayers know what information SARS has accessed, so they know from which field the audit is coming. What are you facing? What information is SARS working off? Having this information is your constitutional right and empowers taxpayers to address the situation legally.
- The Right to just administrative action
Any action by SARS must be lawful, reasonable and procedurally fair.
This means SARS must keep you informed at all times, including when they have completed an audit.
- In terms of Section 42 of the Tax Administrative Act (TAA), SARS must provide you with a Letter of Findings.
- It must include all the facts and the law upon which they are relying to reach this conclusion before they issue you with a revised assessment.
- You are entitled to access that information and respond in full.
‘A recent court judgment was obtained against SARS which set aside the assessment which was raised against the taxpayer, because SARS had failed to comply with the provisions of Section 42 and failed to issue a Letter of Findings. It is an issue that is increasing in prevalence amongst SARS officials.’
- The Duties of SARS
Under Section 195 of the Constitution in particular, it expressly states:
- A high standard of professional ethics must be promoted and maintained. The services must be provided impartially, fairly, equitably and without bias.
- SARS is required to have reason, be rational and accountable for what they are doing.
- Transparency must be fostered and they must provide taxpayers with accessible and accurate information.
This wraps up the Big Five in terms of your rights as a taxpayer and SARS duties which are often being transgressed. Remember, taxpayers are entitled to enforce those rights as contained in our country’s Constitution, which was so painstakingly and ingeniously promulgated on 18 December 1996. If taxpayers are uncertain of their rights or if their rights are being infringed upon, they must seek expert advice.
About Tax Risk Insurance
I have always advocated that taxpayers’ rights should be protected. However, to achieve this, it requires having access to tax experts who can defend taxpayers in the event of a tax dispute. This defence is often cost prohibitive which is why Greatsoft Financial Services offers tax risk insurance,providing access to experts in Constitutional and Tax Law.
Greatsoft Financial Services will guide you through the process, ensuring that your rights are protected and that any SARS tax audit and related disputes are fair and just.
For more information on tax risk cover click here
Author: Prof and Dr Daniel N Erasmus, an international tax attorney who holds a PhD in tax and constitutional law.