SARS has announced it anticipates that the TAA will commence within three months of when it was gazetted, but has warned that, until its date of commencement, the legislation has no force or effect.
In terms of the law that has been created, SARS’ objectives include the efficient and effective collection of revenue, and tax legislation, such as the TAA, seeks to achieve that objective. Tax legislation typically comprises two aspects: tax liability or ‘tax charging’ provisions; and tax administration provisions.
The TAA only deals with tax administration, and seeks to incorporate into one piece of legislation administrative provisions that are generic and are currently duplicated in the different tax Acts; remove redundant administrative provisions; and harmonise the provisions as far as possible.
It is pointed out in the guide that some administrative provisions, that only apply and are unique to the administration of a specific tax type, remain in the legislation imposing that tax. In certain instances, therefore, both the TAA and another tax act may prescribe administrative procedures for the same tax, and a taxpayer must comply with both. For example, the record keeping requirements in the TAA for value added tax (VAT) are supplemented by additional record keeping requirements in the VAT Act which are unique to that tax.
The TAA seeks to simplify administrative provisions, on the principle that “it is easier for a taxpayer to fully comply with law he or she understands, than with law that is too technical and therefore difficult to understand and comply with.”
In addition, the law seeks to promote a better balance between the powers and duties of SARS and the rights and obligations of taxpayers, and to make this relationship more transparent. It is hoped that this balance will greatly contribute to the equity and fairness of tax administration, and also promote further tax compliance.
A further objective is that the TAA should provide a foundation for the future modernisation and development of tax administration in South Africa, such as single registration, self-assessment and accounting transformation.
Single registration should mean that taxpayers will only need to register once with SARS and the basic registration information will then apply for all tax types. To reduce administration, the TAA also builds a platform for a full self-assessment regime where a taxpayer determines his own tax liability and pays the tax.
Accounting transformation should involve, for example, a move to accrual accounting from the current cash basis; a single account for a taxpayer with a rolling balance, including payment allocation rules across taxes; and the alignment of interest across tax types and its calculation on a compounded basis.
The TAA will result in greater access to third party data to underpin SARS’ initiatives, such as the pre-population of individual tax returns, and ensure clearer rules on SARS’s access to information, so tax liabilities can be determined more quickly and accurately.
In its introduction to the TAA, SARS concludes that it “seeks in numerous ways to enhance tax compliance to ensure that every person pays his or her fair share.” However, it also recognises that “the majority of taxpayers are compliant and want a more modern and responsive revenue administration,” but that there is a “minority who seek to evade tax or defraud the government.”
For compliant taxpayers the TAA should ensure better service and a lower compliance cost, but tax evaders, it is said, will face stricter enforcement, assessment and collection powers.
In that respect, while an interim voluntary disclosure programme (VDP) expired in October 2011, a permanent legislative framework for voluntary disclosure that applies to all tax types is included in the TAA. The main purpose of such a framework is “to enhance voluntary compliance in the interest of the good management of the tax system and the best use of SARS’ resources.”
The VDP, seeking to encourage taxpayers to come forward and avoid the future imposition of penalties and interest, will provide 100% relief in respect of administrative non-compliance and understatement penalties, excluding penalties imposed for the late submission of returns or for the late payment of tax; and SARS will not pursue criminal prosecution.
When it was gazetted, SARS spokesperson Adrian Lackay had confirmed that “the preparations of SARS for the implementation of the TAA are at an advanced stage. It eliminates duplication, removes redundant requirements and aligns disparate requirements that currently exist in different tax acts ranging in age from four to 63 years old... (and) creates a single, modern framework.”