Tax Administration

Question 1

Tax return

Answer 1

• If you earn under R500 000 for a full year from one employer and you have no other sources of additional income (interest or rental income)
• No deduction that you want to claim(travel, medical)
• You don’t need to submit a tax return
• Objection 30 days
• Pay now and argue later

Question 2

General principles on tax administration

Answer 2

• Onus of proof lies with commissioner to:
  1. Prove there is an amount for gross income
  2. Proving general anti avoidance provisions as s80A-L applies to TP
• Consider Tax morality
• If agreement does not reflect true intention of parties, SARS will attack and apply substance over form
• Start with s67 (normal tax), s7E, s7F (provisions)
• TAA s22
• This Act administers 3 parties:
  1. SARS
  2. Taxpayer
  3. Ombudsman

Question 3

Burden of proof

Answer 3

BURDEN OF PROOF (S 102)
A taxpayer bears the burden of proving:
 Amount, transaction, event or item is exempt or otherwise not taxable;
 That an amount or item is deductible;
 The rate of tax applicable;
 That an amount qualifies as a reduction of tax payable;

SARS has the burden to prove -
 that an assessment based on an estimate is reasonable; and
 the basis for imposing an understatement penalty
 That a valuation is correct; or
 Whether a ‘decision’ that is subject to objection and appeal is incorrect.

Question 4

Fines and penalties

Answer 4

In terms of s 234 a person that willfully and without just cause acted that is guilty of an
offence of noncompliance with Tax Acts and upon conviction is subject to a fine or imprisonment for a period not exceeding 2
years.

• Disciplinary hearing
• Possible fine or exclusion

Question 5

Types of assessments

Answer 5

1. Original assessment
2. Additional assessment
3. Reduced assessment

Question 6

Types of non-compliance

Answer 6

1. Administrative (did not register etc, intention)
2. Evasion
3. Secrecy
4. Filing a return without authority

Question 7

Non disclosure by a person

Answer 7

• Par 20 underestimate penalty 2nd provisional payment at 20%
• Par 27 late payment 1st and second provisional payment at 10%
• Underestimate penalty TAA
• It will be seen as intentional tax evasion

advise: Ethically not the right thing to do
- Not good for others

Question 8

What to do if you wish to object assessment

Answer 8

-X has a right to lodge an objection against an assessment (section 104(1)).
-He must do so within 30 business days after the date of assessment (section 104(5)).
-The objection must be lodged using the prescribed form (section 104(3)).
-The objection must be submitted with the relevant material (supporting documents) showing the reasons or grounds for lodging an objection (for example that the para 5(1)(a) deduction in the Second Schedule has
not been applied)

Question 9

Understatement penalty

Answer 9

-If the deduction is not available the impact would represent a substantial understatement as defined in section 221 of the Tax Administration Act (TAA).
-28% of R5 000 000 = R1 400 000 which is greater than R1 000 000 prejudice to SARS.
-Based on the penalty grid in section 223(1) of the TAA (on the assumption that this is not a repeat case) the minimum penalty would be 10% (substantial understatement).
-SARS have imposed a penalty of 50% which means that they believe there are no reasonable grounds for the ‘tax position’ taken.
-Based on the answer to part 1 it is submitted that there may have been reasonable grounds for the approach
taken and SARS should be approached to remit the penalty of 50%.

Question 10

Correct assessment

Answer 10

S104 TAA

Question 11

Ceded right

Answer 11

S103(5) ITA