The South African Revenue Service (Sars) has been taking steps to “align” tax practitioners with the law that regulates those who advise or assist taxpayers with their tax matters.
Sars Commissioner Edward Kieswetter confirmed this week that it has started with the deregistration of non-compliant tax practitioners.
“We have come across tax practitioners and tax preparers who often aid and abet taxpayers to either overstate expenses or under-declare income,” he said on the sidelines of a media briefing on Tuesday.
Once a tax practitioner has been deregistered they will no longer be allowed to give advice or submit returns on behalf of taxpayers. If it is a sole practitioner this may require the taxpayer to take their tax matters to a new practitioner.
Industry bodies such as the South African Institute of Tax Professionals (Sait) and the South African Institute of Chartered Accountants (Saica) confirmed that their members have been receiving letters from Sars about non-compliance.
Beatrie Gouws, head of stakeholder management and strategic development at Sait, says Sars has been pursuing tax practitioners whose own returns are not up to date or who have unpaid debts with Sars.
Tax practitioners have also been receiving letters from Sars on the way they are handling taxpayer files or because they are missing “procedural commitments” such as deadlines.
Saica tax suite project director Somaya Khaki says Sars has given non-compliant practitioners a specific timeframe to remedy complaints or to prove to Sars that they are in fact compliant.
From administrative to criminal non-compliance
The non-compliance can range from criminal conduct to non-submission of tax returns over multiple tax types, as well as non-compliance with the bylaws or codes of conduct of the recognised controlling bodies (RCBs).
The regulatory framework for tax practitioners was introduced in 2013 to ensure that practitioners are properly qualified when they give advice – either in terms of educational qualifications or years of experience.
“If someone is registered [with an RCB and Sars] one would assume that they have the required experience and qualifications,” says Khaki.
The section of the Tax Administration Act relating to the deregistration of tax practitioners for non-compliance is relatively new.
If a practitioner has been found tax non-compliant in the last 12 months for an aggregate period of at least six months, they will first receive a letter from Sars requesting them to either prove that they are compliant or to remedy the non-compliance within 21 days of that letter.
However, if they do not prove compliance or the non-compliance is not remedied within the specified time period, they will be deregistered as a tax practitioner and may not practice as such from the date of deregistration – and, effectively, for a further period of six months after having become compliant.
“If a tax practitioner has offered proof that they are compliant, and Sars rejects the evidence, the practitioner can approach their controlling body and request intervention,” says Khaki.
There are currently nine controlling bodies recognised by Sars. In addition, the Tax Administration Act also automatically recognises the Law Society of South Africa, the General Council of the Bar of South Africa, Bar Councils and Societies of Advocates as well as the Independent Regulatory Board for Auditors (Irba) as controlling bodies.
According to Gouws all the RCBs maintain the minimum qualifications and experience requirements of their members as well as the continuing professional education requirements, tax compliance and disciplinary process and procedures.
She says if a practitioner is registered in terms of the Act it is reasonable to expect that they will act as an interface with Sars, and also manage the taxpayer’s tax and procedural risk – ensuring that the taxpayer follows the correct procedures and discloses the necessary information based on the appropriate tax positions.
Taxpayers must be wary of tax practitioners who want to use their profile to submit their return. Practitioners have profiles linked to their clients with Sars. In instances where there has been misconduct, Sars and the RCB can hold the practitioner accountable for their actions.
However, the ultimate responsibility for their tax affairs remains with the taxpayer, regardless of whether someone else prepares it on their behalf, says Khaki.
“Sars will come after you as the taxpayer.”
People need to take that seriously and not just abdicate all the responsibility to the tax practitioner, warns Khaki.
Kieswetter says Sars is “clear” that taxpayers will be held accountable for their own declarations, but to the extent that tax practitioners are complicit there is legal recourse against them.
Khaki says if the practitioner was negligent or offered bad advice, taxpayers can complain to the RCB or to Sars and there will be investigations. There will be consequences if there is evidence of negligence.
If however the individual ends up with a tax liability because of an incorrect disclosure, they still need to answer to that. The action against the practitioner is a separate process.
Gouws warns that taxpayers who use non-registered practitioners open themselves up to tax, reputational and financial risks.
“It makes them vulnerable to costly administrative and procedural mistakes, even if the tax position they have adopted is correct. They are also vulnerable to false promises and fly-by-nights because the individual is not being held accountable by a RCB.”