ATC221201: Report of the Select Committee on Finance on the 2022 Tax Administration Laws Amendment Bill [B27B - 2022] (National Assembly- section 75), dated 01 December 2022
Report of the Select Committee on Finance on the 2022 Tax Administration Laws Amendment Bill [B27B - 2022] (National Assembly- section 75), dated 01 December 2022
1.Introduction and background
The Minister of Finance first introduced the draft version of the 2022 Tax Administration Laws Amendment Bill (TALAB) in July 2022. The TALAB was formally tabled in Parliament on 26 November 2022, together with the Medium Term Budget Policy Statement (MTBPS).
The Committee received a briefing from the National Treasury and the South African Revenue Service (SARS) on 18 October 2022. Despite calling for public comments, the Committee received no submissions on the 2022 TALAB.
2.Overview of the amendments in the 2021 TALAB
The objective of the 2022 TALAB is to amend the following Acts: Transfer Duty Act (TDA), 1949, Estate Duty Act (EDA), 1955, Income Tax Act, 1962 so as to make a consequential amendments; textual corrections; and to allow a regulated intermediary to recover refundable dividends tax from the Commissioner in certain instances; the Customs and Excise Act (CEA), 1964, to provide for the publication of advance rulings in certain circumstances; to enable the Commissioner to make rules for the time for submission of entries in respect of any types of cargo; to clarify a provision relating to particulars on invoices and to effect changes to other provisions consequential to this clarification to ensure consistency of wording relating to invoice particulars; to repeal an outdated provision; to insert a chapter providing for advance rulings in respect of the tariff classification, the application of a specific valuation criterion and the origin of goods of a specific class or kind and for related matters; to provide for consequential amendments relating to advance rulings; and to enhance the general enabling rule provision; the Value-Added Tax Act (VAT), 1991, so as to make consequential amendments and insert a specific exception from registration for non-resident suppliers under certain circumstances; the Tax Administration Act (TAA), 2011, so as to amend a definition; delete a recognised controlling body; to provide that the tax compliance status of a taxpayer must also include an indication that a taxpayer is a newly registered taxpayer as stipulated and to clarify that SARS has the right to revoke third party access to a taxpayer’s tax compliance status under certain circumstances; the Employment Tax Incentive Act (ETIA), 2013, so as to classify an employment tax incentive reimbursements as a refunds for purposes of the TAA, 2011, and specifically as refunds of tax for purposes of the understatement penalty provisions in terms of that Act, and to provide for matters connected therewith.
3.Proposed amendments in the draft 2022 TALAB and key issues raised by the stakeholders
This section briefly summarises the key issues raised during National Treasury and SARS’ public consultation process. The SeCoF received no public comments on the 2022 TALAB.
3.1Customs and Excise Act
3.1.1Clarifying the requirements for invoices for purposes of the Customs and Excise Act
The draft 2022 TALAB proposed to amend the legislation to clarify the requirements for invoices in respect of goods imported or exported. The requirements specifically allow the Commissioner to prescribe particulars in respect of invoices by rule. As further explained by the National Treasury, an invoice supporting an entry of goods must be true and correct and reflect the information that is required to be able to make a valid entry of the relevant goods, but the Commissioner may prescribe additional particulars depending on the circumstances, which particulars may also include particulars in respect of the transaction value of the goods.
The draft 2022 TALAB proposed to change the definition of “invoice” to avoid repetition and to ensure consistency about the wording referring to invoices or particulars on invoices in the Act. After the public consultation process, the draft 2022 TALAB proposes that the definition of an “invoice” be changed to refer to an invoice contemplated in section 41(1) to ensure consistency.
3.1.2Advance rulings under the Customs and Excise Act
The draft 2022 TALAB proposed the insertion of Chapter IXA, to give effect to the 2022 Budget announcement that an enabling framework for advance rulings will be provided for in the CEA. As the SARS clarified, Article 3 of the World Trade Organisation Trade Facilitation Agreement obliges member states to provide for a system of advance rulings for the tariff classification and origin of goods as well as on the appropriate method or criteria to be used for determining the customs value of goods. The advantages of advance rulings that are binding for some time include facilitating international trade by assisting clients to assess future duty liabilities and to do better financial planning, as well as providing clarity and certainty and thereby improving compliance by traders. South Africa has committed to implementing such a system by 22 February 2028.
After the public consultation process, the draft TALAB proposes that applications for advance rulings be limited to importers; and the tax compliance requirement for applicants amended to provide for an applicant to be considered as tax compliant where arrangements acceptable to SARS have been made to file outstanding tax returns or pay an outstanding tax debt. The other concerns raised during public consultation are matters that will be addressed in the rules to be drafted and subject to their public consultation process.
3.2Tax Administration Act
3.2.1Tax compliance status system abuse
SARS observed increased abuse of the tax compliance status system, where taxpayers that are economically active may file nil or otherwise inaccurate returns to meet the requirement that there are no outstanding returns, amongst other abuses. In the 2022 Budget review, it was proposed that approaches to ensuring that the tax compliance system provides a more accurate reflection of the actual tax compliance status of taxpayers be investigated.
As a preliminary step in combatting the abuse, the draft 2022 TALAB proposed to clarify the TAA that SARS has the right to revoke third-party access to a taxpayer’s tax compliance status should it become apparent at any point in time that the taxpayer’s tax compliance status is in question due to fraud, misrepresentation or non-disclosure of material facts.
Taxpayers will continue to be given at least 10 business days’ notice to respond to SARS’ concerns before revocation may take place. As a further precautionary measure, it was also proposed that the tax compliance status of a taxpayer include an indication that a taxpayer is a newly registered taxpayer if the taxpayer has not reached the date for the submission of a return or making of payment in respect of any of the taxes for which they are registered. Users of the tax compliance status will thus be aware that the status is not based on actual returns or payments and that additional due diligence may be required.
To take the public comments into consideration, the draft 2022 TALAB proposes changes to clarify that, the legislation refers to a suspicion of fraud, misrepresentation or non-disclosure of material facts; reserve the power to revoke access for a senior SARS official; address the challenge that may be encountered by dormant companies registered for Corporate Income Tax (CIT) that are not required to submit provisional tax returns or individuals registered for Personal Income Tax (PIT) that fall within the auto-assessment population; and a taxpayer will thus no longer be regarded as a “newly registered taxpayer” on the earlier of the following three events: the taxpayer has reached the first date on which the taxpayer is required to submit a return or make a payment under a tax Act, in respect of a tax for which the taxpayer is registered; The taxpayer has submitted a return or made a payment, prior to the first date on which the taxpayer is required to submit a return or make a payment as mentioned; or a period of one year from the date the taxpayer was registered for a tax in terms of a tax Act has lapsed.
3.2.2Imposition of understatement penalty for employment tax incentives improperly claimed
Given the abuse of the Employment Tax Incentive (ETI) that has been encountered, SARS proposes that the ETIA be amended to facilitate the imposition of understatement penalties on ETI reimbursements improperly claimed. This is achieved by classifying ETI reimbursements as refunds for purposes of the TAA and specifically as refunds of tax for purposes of the understatement penalty provisions.
After the public consultation process, the draft 2022 TALAB proposes that the effective date of implementation be changed to indicate that the proposed amendment will apply to returns filed on or after 1 September 2022 and an understatement penalty be imposed in terms of the TAA will be reduced by any penalty imposed on the relevant ETI reimbursement improperly claimed under the ETIA to ensure that there is no duplication of penalties.
4.1Essentially this Bill is mainly related to the TLAB. The Committee refers to the recommendations in the 2022 TLAB as relevant to the recommendations in this Bill.
The Select Committee on Finance, having considered and examined the Tax Administration Laws Amendment Bill [B27B - 2022] (National Assembly – section 75), referred to it, and classified by the JTM as a section 75 Bill, accepts the Bill.
The Democratic Alliance (DA), Economic Freedom Fighters (EFF) and Freedom Front Plus (FF+) reserve their position.
Report to be considered