Well, it’s complicated. In the world of tax, as taxpayers, you or your client needs to jump through hoops to make sure the tax return and accompanying documents are scrutiny proof. Equally, so must SARS comply with many strict provisions in their processes. But this is not common knowledge amongst taxpayers.
The submission of tax returns doesn’t always end simply with an assessment to which both parties agree. Audits and disputes happen more often than you think. However, the processes in tax audits, assessments and disputes are strictly regulated and SARS is required, by law, to comply.
A tax audit and assessment by SARS is bound by provisions set out in a number of regulatory bodies, such as the Tax Administration Act (TAA), the Promotion of Administrative Justice Act (PAJA), and the Constitution. So it’s a triad of regulatory bodies, and compliance is imperative in all three. It’s tricky and SARS do trip up – more often than you think.
It’s a fine line SARS walks between pursuing those who are not tax compliant, and remaining procedurally complaint in their pursuit. It starts with the first step in a dispute – issuing you or your client with a notice of assessment. Your right to appeal must be clearly set out in the notice. If the taxpayer isn’t properly notified as required by law, it can all go pear-shaped for SARS.
Regardless of whether you are compliant or not, if this procedure as defined in the TAA is not followed, the assessment could be deemed unlawful and procedurally unfair by the Courts.
A very specific set of procedures needs to be followed by SARS during an audit leading up to an assessment for you or your client:
- The taxpayer, must be informed of the progress of the audit on a regular basis
- Once the audit is complete and before the new assessment is issued, the taxpayer must be notified of the audit findings
- You or your client should also be given a fair opportunity (30 days) to dispute these findings
- SARS has 60 days in which to answer to objections
- SARS have a three month time period to finalise the Alternative Dispute Resolution (ADR)proceedings that flow from the Appeals process
- If SARS fail to adhere to these time periods, which unfortunately seems to be the prevailing practice, a taxpayer can apply to the Tax Court for Default Judgement of the tax debt, provided you or your client too are compliant with certain provisions
- SARS may also not issue an assessment after three years has passed from the original assessment.
These are typical legal requirements which fall within the ambit of administrative justice and the right to be heard, prior to being prejudiced.
Unsurprisingly, too many assessments by SARS do not comply with the strict constitutional prerequisites. And the taxpayer under scrutiny is none the wiser. To adapt a well-known saying, ‘What you don’t know, can’t benefit you.’
Tax dispute resolution is usually a protracted and expensive exercise. One look at this process (click here)and you will understand why you or your client needs experts to guide you through the procedures.
The good news is that there are tax risk insurance products that mitigate this risk and guide you or your client through the process, ensuring your rights as a taxpayer are protected.
To learn more about Tax Assist. (click here)