SA needs a tax bill of rights to govern how Sars treats taxpayers

©Andriy Popov

The bill of rights would regulate the interactions and expectations of the relationship between Sars and taxpayers. It should be made enforceable and with legal effect.

The committee deals with a taxpayer bill of rights in its report on tax administration, released Monday.

One of the rights that should be contained in the bill should be the right to finality, which refers to the right to know the time frames for reviews and audits, as well as response times for Sars to address taxpayers' queries, objections and appeals.

"The taxpayer should be given the benefit of conclusion of the matter where the tax authority fails to abide by such time frames," the report says.

Another right should be the right to privacy and confidentiality - which are currently provided for in the Constitution and the Tax Administration Act - as well as the right to complete, accurate, clear and timely information (the right to know), including the right to explanations and reasons for Sars decisions.

The committee also proposes the right to pay no more than the correct amount of tax and the right to an impartial review in the event of a dispute over the amount owed. It notes that currently Sars "savagely" applies the "pay now, argue later" principle, "regardless of the fact that its constitutionality has not been tested".

"The 'pay now, argue later' rule is, however, an infringement to the right to property as enshrined in the Constitution. The main reason for the rule is to ensure that Sars is not out of pocket (put differently, that SARS is in the money) during the process of appeal or review.

"This rule also has the effect of discouraging taxpayers from engaging in appeal or review processes against Sars as, psychologically, the taxpayer would have 'lost' the money already.

"This rule creates a huge bias in favour of Sars. The argument that taxpayers often raise frivolous objections serves to ignore various other available measures of determining the validity of objections.

"In order to strike a balance between the taxpayer's right not to pay amounts in dispute before the matter has been heard by an impartial tribunal and Sars powers to collect taxes without the impediment of frivolous objections, it is recommended that taxpayers be required to pay a portion of the tax claim in dispute. This amount would be deemed to be a down payment if the matter is decided against the taxpayer.

"On the other hand the amount would be refunded should the matter be fully decided in favour of the taxpayer. The committee recommends that the amount be set at 40% of the claim by Sars."

Taxpayers should also have the right to legal representation, the right to quality service, and the right to a fair and just tax system, the committee said.

The committee further recommended that the tax ombud be given the power to enforce the taxpayer bill of rights. The tax ombud should also be given an enhanced role and powers, and the model of its engagement with SARS should be improved to improve tax morality and compliance.

It also argued that confidence in, and the credibility of, the tax ombud would greatly benefit from transparency of its activities.

Over time the powers of the ombud should be extended to propose amendments to tax norms (both administrative and technical in nature).

This would enable the ombud to proactively participate in the improvement of the tax system, and to act as a mediator in a tax alternative dispute resolution mechanism.