The release of the 2020 Draft Taxation Laws Amendment Bill (Draft TLAB) and the 2020 Draft Tax Administration Laws Amendment Bill (Draft TALAB) at the end of July is likely to have worrying consequences for taxpayers.
These draft bills deal with various tax proposals but the proposed amendment which is most concerning, is the amendment and removal of the word “wilfully” in relation to offensive conduct by a taxpayer.
Generally, before a taxpayer can be found guilty of an offence, it has to be proven to be an intentional action. The various Acts have also made provision for conduct that would result in a fine or imprisonment provided that these were committed ‘wilfully and without just cause’. Currently, this clause can be found in the following sections of the relevant acts:
- Paragraph 30 of the Fourth Schedule to the Income Tax Act 58 of 1962;
- Section 58 of the Value Added Tax Act 89 of 1991; and
- Section 234 of the Tax Administration Act 28 of 2011 (TAA).
The Draft TALAB proposes to remove the word ‘wilfully’ thereby allowing SARS to hold taxpayers liable for misconduct even in cases of negligence. Currently, the burden of proof rests on SARS to prove intent while the proposed amendments shift the burden onto the taxpayer, to prove negligence. In simple terms, this leaves little room for error, as previously argued cases of negligence on the taxpayer’s part may now not be taken into consideration should this bill be passed.
The question now arises, does the punishment meet the offense? It would appear that the intended amendments look to punish taxpayers for negligent errors in the same manner in which intentional errors are punished. For example, does this then mean that taxpayers will be punished and held criminally liable for “finger errors”? Will the unintentional, incorrect answering of certain questions on the tax return (which have no impact on taxable income) also be criminally punishable?
It would appear that these amendments would provide the mechanism to increase audits and verifications, leading to increased tax collections.
While these specific amendments have not been gazetted, taxpayers would need to be weary and cautious with their declarations as this provides an indication of SARS’ intentions.
Regional Divisional Director: Corporate Tax, Johannesburg