ATC201111: Report of the Standing Committee on Finance on the Tax Administration Laws Amendment Bill [B28 - 2020] (National Assembly- section 75), dated 11 November 2020

Finance Standing Committee

Report of the Standing Committee on Finance on the Tax Administration Laws Amendment Bill [B28 - 2020] (National Assembly- section 75), dated 11 November 2020

 

The Standing Committee on Finance, having considered the Tax Administration Laws Amendment Bill [B28 - 2020] (National Assembly- section 75), referred to it, reports the Bill as follows:

 

1. INTRODUCTION AND BACKGROUND
   1. The Tax Administration Laws Amendment Bill (TALAB) was tabled in Parliament by the Minister of Finance, together with the 2020 Medium-Term Budget Policy Statement. The TALAB was published by National Treasury for the first time on 31 July 2020 in order to solicit public comments on it, with a closing date of 31 August 2020. National Treasury and SARS hosted workshops with stakeholders to discuss their written comments on it, together with other tax bills, on 9, 10 and 11 September 2020.
   2. The TALAB an ordinary Bill that must be considered in terms of section 75 of the Constitution, dealing with tax administration issues
   3. The National Treasury and SARS briefed the Committee on the Draft Bill on 19 August 2020. Subsequently, oral presentations by taxpayers and tax advisors on these tax bills were made at hearings held by the Committee on 7 October 2020.
   4. On 13 October 2020, National Treasury and SARS presented its detailed responses to the Draft Bill to the Committee, addressing all the comments made during the public hearings and Committee deliberations.

 

1. PUBLIC PARTICIPATION
   1. Before briefing Parliament on the Draft Tax Bills, including this Bill, NT reported that it received 112 written submissions from the public and responded to these comments. It also hosted workshop which ran for three days on 09, 10 and 11 September. 
   2. After receiving the initial briefing from NT and SARS on 19 August, the Committee called for public comments and received comments from the South Africa Tobacco Transformation Alliance, British American Tobacco South Africa, Black Tobacco Farmers Association, Limpopo Tobacco Processors, and Phillip Morris. On the other Bills, the Committee received comments from Smartfunder, South African Institute of Tax Professionals, PwC, South African Institute of Chartered Accountants, South African Institute of Professional Accountants, Minerals Council, International Zinc Association, ArcelorMittal, Copper Development Association Africa. Metal Recycler’s Association of South Africa, Scaw South Africa, Tax Consult, EdNVest, Solidarity, Bowman’s, South African Petroleum Industry Association and, South African Informal Traders Alliance.
   3. The Committee held public hearings on 07 October 2020 and received oral presentations from the above stakeholders and the National Treasury and SARS made responses on 13 October 2020. 

 

1. OVERVIEW OF THE KEY TAX PROPOSALS IN THE TALAB
   1. The TALAB contained proposals to:
      1. amend the Estate Duty Act, 1955, so as to make textual corrections; amend the Income Tax Act, 1962, so as to delete obsolete wording; to make a decision subject to objection and appeal; to enable a public benefit organisation to provide funds and assets to any department of government of the Republic and effect consequential amendments relating thereto; to align provisions to provide that only approved public benefit organisations can provide certain certificates; to provide that audit certificates must be obtained and retained by certain organisations; to align situations where withholding tax on royalties was due and payable but subsequently becomes irrecoverable with that of withholding tax on interest; to provide that certain entities be excluded from the definition of provisional taxpayer; to align the wording with certain current processes and remove a reference to a deleted provision; to modify the requirement of intent for certain criminal offences; to effect a consequential amendment; and to replace a reverse onus provision with an evidentiary burden;
      2. amend the Customs and Excise Act, 1964, so as to make technical corrections; to extend a provision concerning information sharing and to exclude certain information from the application of the prohibition on disclosure of information; to clarify the movement in bond of containerized goods on the strength of a manifest and without furnishing security to licensed container depots or container terminals appointed or prescribed; to clarify how bills of entry may be adjusted; to broaden provisions relating to the disposal of goods on failure to make due entry on importation to also include failure to make due entry on exportation of goods on which export duty is payable; to provide for the commencement of liability for export duty; to provide for the liability of the master of a ship or pilot of an aircraft or other carrier for duty on goods deemed imported to cease upon delivery of the goods to a licensed remover in bond, for the assumption of such liability by a licensed remover in bond, as well as for the circumstances in which liability of the licensed remover in bond will cease; to clarify the meaning of ‘‘free on board‘‘ in relation to goods exported; to provide for the limitation of the period for applications for refunds of export duty; and to broaden a provision relating to the production of permits or certificates required in respect of imported goods to apply to exported goods as well;
      3. amend the Value-Added Tax Act, 1991, so as to substitute the requirement to submit a return with the obligation to obtain, complete and retain the form prescribed by the Commissioner; to substitute obsolete wording; and to modify the requirement of intent for certain criminal offences;
      4. amend the Skills Development Levies Act, 1999, so as to provide that the Commissioner may refuse to authorise a refund if a return is outstanding;
      5. amend the Unemployment Insurance ContributionsAct, 2002, so as to provide that the Commissioner may refuse to authorise a refund if a return is outstanding;
      6. amend the Tax Administration Act, 2011, so as to provide for a textual correction in order to clarify certain terminology; to provide for consequential and technical amendments; to provide for the issue of assessments based on an estimate where a taxpayer provides relevant information that is incomplete or inadequate or does not respond to a request for relevant material; to amend the period within which a reduced assessment can be requested; to align the period within which an extension may be granted with the period for prescription; to provide for a specific effective date with regards to interest calculated on an erroneous overpayment of tax; to provide for interest on royalties payable in terms of the Mineral and Petroleum Resources Royalty (Administration) Act, 2008 and to provide for the interest rate with regards to refunds due under that Act; to provide that a refund does not need to be authorised where a matter is under criminal investigation and to modify therequirement of intent for certain criminal offences,and
      7. provide for matters connected therewith.

 

1. KEY ISSUES RAISED DURING THE PUBLIC HEARINGS
   1. The main key issue on the proposals of the draft version of this Bill in the public hearings were on amendments to the Tax Administration Act, 2011 in respect of the raising of assessments based on an estimate and, on the grace period to determine if a payment in excess of an assessment was erroneous. In respect to the Income Tax Act, 1962; Value-Added Tax Act, 1991 and; the Tax Administration 2011, the key issue was on the removal of a requirement to prove intent from certain statutory tax offences.

 

Removal of a requirement to prove intent from certain statutory tax offences

1. This is one of the most controversial proposals in the TALAB proposals. SARS explained to the Committee that the requirement of intent is generally applicable to common law offences and serious statutory offences in South Africa, while the requirement of negligene, whether explicitly state or not, is more typical of lesser statutory offences. SARS stated that the requirement of “willfully and without just cause” was not a general requirement for lesser tax offences before the promulgation of the Tax Administration Act. It stated that this requirement does not appear in any other South African legislation and its proposal and adoption through the Tax Administration Act appears to have been an error.
2. The proposal in TALAB is the requirement of willfulness be deleted from the certain provisions of the Income Tax Act, 1962; Value-Added Tax Act, 1991 and; the Tax Administration 2011.
3. There was a lot of opposition to this proposal from the stakeholders in the hearings. In the hearings a proposal was made that this proposal be withdrawn completely or a differentiated approach be applied to various offences depending on their severity. SARS accepted that a differentiated approach will be adopted in the Bill. SARS said that “rather than do away with intent entirely, offences will be categorized into those for which intent or negligence is required and those for which intent is required.” It said that “the first category will include aspects of non-compliance that strike at key duties that the tax system’s broad application depends on, such as failing to register, submit returns, pay over tax that has been collected from a third party and so on”. SARS further explained that the second category will include aspects of non-compliance where the nature of the non-compliance is such that the requirement of intent is implied, such as issuing a false document, obstructing or hindering a SARS official, assisting another person to dissipate their assets to impede tax collection and so on.” SARS added that the maximum penalty for the offences to be amended will be a fine or two years’ imprisonment and will be left to the presiding officer to decide what sentence is appropriate on conviction, considering all the aspects of the case.
4. The Committee supports the above revised proposals in the TALAB. 

 

1. CONCLUSION
   1. The Committee reports the Bill without amendments.

 

Report to be considered.

 

The DA reserves its position.