The Pretoria High Court held that having regard to the nature of the case and the legal and constitutional questions involved, that this was an appropriate case in which a substitution of the decision of SARS to refuse access to information should be made. SARS was bound by the statutory prohibitions and, once those had been found to be unconstitutional, the remainder of the elements of the public interest override provisions constitute an exceptional case as contemplated in Section 8(1)(c)(ii)(aa) of PAJA.
Sections 35 and 46 of the Promotion of Access to Information Act 2 of 2000 (“PAIA”) are unconstitutional and invalid to the extent that they preclude access to tax records by a person other than the taxpayer even in circumstances where the requirements set out in subsections 46(a) and (b) of PAIA are met.
Sections 67 and 69 of the Tax Administration Act 28 of 2011 (“the TAA”) are unconstitutional and invalid to the extent that –
• they preclude access to information being granted to a requester in respect of tax records in circumstances in which the requirements set out in subsections 46(a) and (b) of PAIA are met; and
• they preclude a requester from further disseminating information obtained as a result of a PAIA request.
The above declarations of invalidity are suspended for a period of two years from the date of the Court order to enable Parliament to correct the relevant defects.
Postscript: SARS Media Statement 30 November 2021
SARS has issued a media statement that it is appealing the judgment and opposing the confirmation by the Constitutional Court of the unconstitutionality of the Promotion to Access to Information Act and Tax Administration Act.
SARS’s view is that the judgment as it currently stands, if left unchallenged, would undermine the sacrosanct principle of the confidentiality of taxpayer information, which is the bedrock upon which the work of SARS and other international revenue authorities is based.
ANNUITY UPON RETIREMENT – SARS BGR 58
The Income Tax Act governs the Rules of tax-approved Retirement Funds (Pension, Provident, Retirement Annuity and Preservation) in the respective definitions in Section 1(1) of the Income Tax Act.
SARS Binding General Ruling (BGR) 58 replaces GN18 and provides for 3 core issues:
1. A combination of annuity types is now permitted which could be either:
• in the name of the retiring member; or
• in the name of the retirement fund; or
• paid directly by such retirement fund
2. That any annuity on retirement must be compulsory, non-commutable, payable for and based on the lifetime of the retiring member or the value of the member’s benefit, if applicable.
3. The annuities may not be transferred, assigned or attached by creditors as per sections 37A and 37B of the Pension Funds Act.
THE SPUR CASE – Part 2 – PRESCRIPTION AND RE-OPENING OF ASSESSMENTS
Spur contended that the Commissioner was precluded from issuing the additional assessments in respect of the 2005 to 2009 years of assessment by virtue of Section 99(1) of the Tax Administration act (TAA). Their counsel’s contention was that the additional assessments were raised after the period of three years from the date of the original assessments.
Section 99(1) of the TAA provides that the Commissioner may not make an assessment three years after the date of the original assessment by SARS. However, Section 99(2)(a) of the TAA provides that the Commissioner is not bound by the three-year period of limitation when in the case of assessment by SARS, the fact that the full amount of tax chargeable was not assessed, was due to –
• Misrepresentation; or
• Non-disclosure of material facts.
The Commissioner averred that the amounts of tax chargeable under the additional assessments were not so assessed by SARS in the 2005 to 2009 years of assessment owing to misrepresentation and non-disclosure of material facts by Spur. This claim was specifically formulated as follows in SARS’s finalization of audit letter (i.e. the letter of assessment) dated 28 December 2015.
“As a result of the misrepresentation and non-disclosure in the tax returns the Commissioner was unable to make a full and proper consideration of the tax consequences of the Contribution and the share incentive scheme. These misrepresentations and non-disclosures therefore caused SARS to assess the Taxpayer on a different basis to what it would have assessed had the facts been properly disclosed in the tax years.”
It is common cause that Spur, in submitting its 2005 income tax return, (IT14), answered “no” to the following questions:
“Were any deductions limited in terms of Section 23H? Did the company make a contribution to a trust? Was the company party to the formation of a trust during the year?”
In the 2006 income tax return, Spur answered “no” to the question: “Were any deductions limited in terms of Section 23H?”
Lastly, in each of the 2005 to 2008 income tax returns, the amount of deductions claimed in respect of the contribution, which were limited by Section 23H of the Income Tax Act, were disclosed by Spur under the category “other deductible items” and not under the line item “prepaid expenditure (as limited by Section 23H)”.
It must be kept in mind that the basic legal requirement is that taxpayers must submit an annual return of income in terms of Section 25(1) of the TAA, which return is required by Section 25(2) of the TAA to be “full and true”. Furthermore, the return itself requires the public officer to make a declaration, inter alia, that the information and particulars furnished in the return are true and correct.
The Court held that Spur’s further argument that the Commissioner had all the relevant and correct facts at his or her disposal because Spur’s annual financial statements were submitted together with the tax returns, and that the correct information could be distilled from them, is unhelpful. The mere fact that an astute auditor or assessor could have been able to ascertain from supporting documentation the fact that the return contains a misrepresentation, cannot mean that there is no misrepresentation in the first place.
The Commissioner submitted that in the present case a “yes” answer to the Section 23H question, and to the question whether a contribution was made to a trust, are risk factors which would have triggered a risk alert for SARS at the time when the returns were submitted for the relevant years of assessment. In contrast, the “no” answer to these questions would not, accordingly, have triggered a risk alert for SARS.
SARS was thus not alerted to the existence of the share scheme transactions and this persisted until the true position was picked up in the course of a subsequent audit in respect of the 2011 tax year.
The Court added that as a matter of policy, it would be loath to come to the assistance of a taxpayer that has made improper or untruthful disclosures in a return as this would offend against the statutory imperative of having to make a full and proper disclosure in a tax return and therefore found that the misrepresentations and non-disclosures by Spur caused the Commissioner not to assess Spur correctly within the three-year period after the original assessments and the taxpayer’s defence of prescription failed.
STATE CAPTURE REPORT – SARS
Chapter 3 of Volume 3 of Part 1 of the State Capture Commissioner (Zondo) Report, released 5 January pertains to SARS.
The Key Conclusions and Recommendations are as follows:
Conclusions which dovetailed with the Nugent Commission’s finding:
– Massive failure of integrity and governance at SARS.
– Reckless mismanagement of SARS by Mr Moyane.
– Senior Management driven out or marginalised and compliant (to Mr Moyane) persons appointed.
– Culture of fear and intimidation.
– The “profound strategy refresh” by Bain Management Consultants and Mr Moyane was just a pretext for the assumption of control over SARS, for ulterior purposes.
– Bains’s role and contracts with State Departments be reviewed.
– The SARS Act of 1997 be amended to provide for a transparent and competitive process in the appointment of the Commissioner, SARS.
– Mr Moyane be charged with perjury regarding his false evidence to Parliament.
WORKING WITH WORKSHEETS IN EXCEL USING SHORTCUT KEYS
I recently had to prepare a statement of assets and liabilities at cost in Excel. I used Worksheet 1 for this purpose, with subsequent worksheets being used as supporting schedules. I had long known that one can quickly navigate between worksheets using the CTRL + Page Up and CTRL + Page Down keys but I did not know how to insert a new worksheet, rename it and then move it into the correct position using the keyboard. Rather annoyingly, Excel inserts a new worksheet before the active sheet, so it is usually necessary to move it to the right of the active sheet.
Here are the shortcut keys to achieve these tasks.
1. To insert a new worksheet press Shift + F11. The new worksheet will be inserted before the active sheet.
2. To rename a worksheet, while on the worksheet in question, press ALT, H, O, R. This shortcut sequence will enable you to edit the worksheet name. Once you have replaced, say, Sheet1 with the name of your choice, hit enter.
3. If, say, Worksheet 3 is before Worksheet 2 and you have four worksheets, navigate to sheet 3, and press ALT, H, O, M to activate the Move or copy dialog box. Then tab five times to get to the before sheet list box. Arrow down onto sheet 4 and hit enter. You can move a worksheet to the end by selecting ‘(move to end)’. This option would be useful if you had inserted Sheet4 before Sheet1 and wanted to move it after Sheet3.
SARS INTERPRETATION NOTES NOTER-UP
Since the last newsletter, no new Ins have been issued. The following draft Interpretation Note was published for further comment:
Draft IN: 28 (issue 3) | Date of issue: 15 November 2021 | Description: Deductions of home office expenses incurred by persons in employment or persons holding an office. It was previously published for comment in May 2021 and has been updated for the comments received.
On 10 November 2021 SARS published the following discussion paper: Proposed Model for Establishing an Advance Pricing Agreement Programme in South Africa and Release of Draft Legislation