ATC211208: Report of the Select Committee on Finance on the 2021 Tax Administration Laws Amendment Bill [B23 - 2021] (National Assembly- section 75), dated 08 December 2021

NCOP Finance

Report of the Select Committee on Finance on the 2021 Tax Administration Laws Amendment Bill [B23 - 2021] (National Assembly- section 75), dated 08 December 2021

1.Introduction and background

The Minister of Finance first introduced the draft version of the 2021 Tax Administration Laws Amendment Bill (TALAB) during the February 2021 National Budget tabling. The TALAB was formally tabled in Parliament on 11 November 2021, together with the Medium Term Budget Policy Statement (MTBPS).

On 30 November 2021, the National Council of Provinces (NCOP) formally referred the TALAB to the Select Committee of Finance (SeCOF), for consideration and reporting.

In terms of a procedure followed to process the TALAB, the Committee received a briefing from the National Treasury and the South African Revenue Service (SARS) on 30 November 2021. Despite calling for public comments, the Committee received no submissions on the 2021 TALAB.

2.Overview of the amendments in the 2021 TALAB

The objective of the 2021 TALAB is to amend the following Acts: the Estate Duty Act, 1955, so as to make textual corrections; the Income Tax Act, 1962, so as to enable the Commissioner to request certain information by public notice, to align the provision with regard to submission of a return by a foreign person in respect of withholding tax on royalties with that of withholding tax on interest, to align the refund limitation rules for dividends paid in specie with that of dividends paid in cash, to provide that the prescription periods will not apply with regard to certain deductions claimed by farmers and to provide for extended record-keeping periods; to provide for textual corrections, to provide for a penalty to be raised on an estimate of employees’ tax, to provide that a first provisional tax payment and return will not be required when the duration of a year of assessment does not exceed six months; and to provide for the deletion of a penalty; amend the Customs and Excise Act, 1964, so as to make technical corrections; to expand the purposes for which air cargo may be removed to de-grouping depots to include consolidation and removal to transit sheds for export, to effect amendments consequential to changes to the SARS customs accreditation system, to expand the scope of matters that SARS may investigate to confirm the validity of a diesel refund claim and to make the unlawful possession or use of a customs uniform an offence; amend the Tax Administration Act, 2011, so as to make textual corrections; to provide for an extension in submission of a return or relevant material with regard to assessments based on an estimate, to provide for a date from which a taxpayer may lodge an objection and appeal with regard to assessments based on an estimate, to provide for an exception to prescription and to correct a cross-reference; amend the Disaster Management Tax Relief Administration Act, 2020, so as to amend certain dates in order to provide relief under the Act, and to provide for matters connected therewith.

3.Key issues raised by the stakeholders

This section briefly summarises the key issues raised during National Treasury and SARS’ public consultation process. SeCoF received no public comments in the 2021 TALAB.

3.1On Income Tax Act:

SARS explained that the information required by law in the receipts issued for tax deductible donations is limited and entities issuing the receipts are not required to provide third party data on the donations to it on a systematic basis. SARS reported that it has detected that receipts are being issued by entities that are not approved to do so.

In order to ensure that only valid donations are claimed and that receipts and third party data provided to SARS match, the 2021 draft TALAB proposes that the information required in the receipts be extended to allow such information as the Commissioner may prescribe by public notice from time to time. Third party reporting will thus be extended in future to cover the receipts issued and to make it easier for those receiving and issuing the receipts to comply with their obligations. This will enable SARS to auto populate returns thereby making it easier for donors to claim their valid donations. This will further encourage donations to Public Benefit Organisations (PBOs) by donors and lessen the burden on PBOs where taxpayers approach them for additional documentation requested by SARS during the verification process. PBOs will also be protected from fraudulent claims using their details and the reputational impact such claims have.

3.2On Customs and Excise Act

According to the SARS, the aim of the proposed amendments in the 2021 draft TALAB is to ease the administrative burden on taxpayers and on itself by increasing the minimum thresholds for underpayments of duties by taxpayers, which the Commissioner may condone. A similar amendment is proposed in relation to minimum thresholds for refunds of duty to taxpayers. After the public consultation process, the proposal was withdrawn from the 2021 TALAB that was tabled by the Minister, in order to consider whether this approach could be extended to the Value Added Tax (VAT) Act, 1991, with respect to VAT on importation.

3.3On Tax Administration Act

SARS clarified that, in terms of the current legislation, it may make an original, additional, reduced or jeopardy assessment based in whole or in part on an estimate, if the taxpayer does not submit a response to a request for relevant material after delivery of more than one request for such material. The taxpayer may, within 40 business days from the assessment, request SARS to issue a reduced or additional assessment by submitting the relevant material. A senior SARS official may extend the 40 business day period for a period not exceeding the relevant prescription periods under section 99 of the Act. It may happen that SARS issues an additional estimated assessment close to the end of the relevant prescription period. The 40 business day period may thus end after the prescription date or very close to it, which means that the taxpayer is unable to request a reduced or additional assessment or an extension. The proposed amendment aims to address these unusual circumstances.

After the public consultation process, the following changes were made in the 2021 draft TALAB that was tabled by the Minister, in order to take into account comments received. These changes are, (1) the proposed wording of section 95(7) was revised to make it clear that SARS may grant an extension if reasonable grounds for an extension are submitted by the taxpayer, (2) the proposed wording of section 95(5) and (6) was revised to make it clear that, once a taxpayer submits the relevant material as required in terms of section 95(6) SARS has one of the following three options and the taxpayer may respond accordingly, (i) after the review SARS accepts the relevant material and makes a reduced or additional assessment as requested by the taxpayer, (ii) after the review SARS does not accept some of the relevant material and makes a reduced or additional assessment accordingly, subject to objection and appeal in the ordinary course, since it replaces the assessment contemplated in section 95(1)(a) or (c) and (iii) after the review SARS does not accept any of the relevant material, does not make a reduced or additional assessment and relies on the assessment based on an estimate. In this regard the proposed new section 95 (8) clarifies that, should SARS decide not to make a reduced or additional assessment, the taxpayer may object and appeal within the normal timeframes from the date of the decision and (3) the proposed amendment to section 99 was revised to permit SARS to issue a reduced or additional assessment to give effect to a timely taxpayer request, despite prescription.

4.Committee recommendation

The Committee is of the view that all tax laws need to be applied fairly and that the perception of pursuing industries that may consider themselves to be low-hanging fruit needs to be well-managed, and actual pursuit should be avoided.

 

The Select Committee on Finance, having considered and examined the Tax Administration Laws Amendment Bill [B23 - 2021] (National Assembly – section 75), referred to it, and classified by the JTM as a section 75 Bill, accepts the Bill.

 

Democratic Alliance (DA), Economic Freedom Fighters (EFF) and Freedom Front + (FF+) reserve their position.

 

 

Report to be considered