Like us 07 June 2012 - Issue No. 58
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2012 Tax Update

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Tax on SMME's

2012 SAIT Compendium of Tax Legislation - Volume I & II

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From the Editor

Charles Dickens refers to Ebenezer Scrooge, the main character in his 1843 novel, A Christmas Carol as "... a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner!"

I am sure no one wants to be classified in this manner, but if you read the recent comments by the Minister of Finance about the tax practitioner profession's poor tax compliance levels- one wonders if tax practitioners have "scrooge-like" tendencies!

Perhaps it is time that we revisit our past, present and future and reassess the role of tax practitioners and their statutory recognition. In 2004 an amendment to the Income Tax Act introduced a register of tax practitioners. However section 67A does not stipulate an industry wide code of conduct, does not require membership of a professional body, and has no enforcement mechanism.

Tax years past

Following the democratisation of South Africa in 1994, the performance of the greater treasury function has surpassed all expectations. One of the reasons for the good performance and subsequent general prosperity of South Africa was the effectiveness and efficiency in the collection and administering of taxes.

However, South Africa comes from a past where several historical factors created a tax compliance culture that is less than it should be and is still even a concern today. These factors include:
  • The economic marginalization and consequent lack of knowledge about tax of a large segment of the population
  • The mind-set and practices that took hold when circumventing the imposition of international sanctions
  • The historically limited capacity of the tax and customs administrations to challenge tax evasion and questionable, or even fanciful, tax planning structures and techniques.
Tax years present

The non-compliance culture of a section of the tax profession came to haunt them in the recent budget speech by the Minister of Finance. The Minister made sweeping comments about the profession's poor compliance levels. He rightfully lashed out at tax practitioners who owe over R260 million in outstanding taxes and having more than 18 000 income tax returns outstanding in their personal capacity.

A significant impact on the tax industry post 1994 was the exodus of tax officials from the former Department of Revenue seeking opportunities in private practice as tax practitioners. Many tax officials received high quality functional training within Revenue, but lacked formal qualifications and affiliation with a professional body.

In their 5-year strategic plan for 2012 - 2016 SARS confirmed that tax practitioners who are not registered with a professional body have worse compliance levels in comparison to those that are members of a professional body. For example, the average debt per case for a non-registered tax practitioner is four times higher than for those who are registered. SARS believes that in order to minimise the compliance issues currently being experienced with tax practitioners generally, legislative amendments will be made to compel all practitioners registered with SARS to belong to a professional body.

Tax years yet to come

In the final vision offered to Scrooge he sees the consequences of his actions one year later. No one mourns his passing and all his money and possessions are lost. However Scrooge repents and receives a chance to correct past mistakes.

In the same vain the profession and SARS should reconsider the current path and find common solutions:
  • Tax practitioners should retake the moral high ground and become exemplary taxpayers
  • Tax practitioners should adopt an industry wide code of conduct to regulate their service offerings to tax payers
  • Professional bodies that represent tax practitioners should reclaim their indispensible and internationally recognised role as intermediaries between SARS and tax practitioners
  • SARS should embrace the tax practitioner profession as indispensable in ensuring tax compliance and educating unsophisticated taxpayers
  • SARS should publically commit to the development and support of the tax profession
  • This should lead to the establishment of a new co-regulatory model for the tax profession
The SAIT is committed to this process and was the first professional body, which as a condition of membership requires a tax clearance certificate to be submitted to the Institute as proof of compliance.

Yours truly
Stiaan Klue
Playing hide and seek with the taxman
By Masood Boogaard (Business Report)
South Africans are fascinated by race. On meeting me for the first time people ask, "What are you? Are you coloured?.
SARS mulls options after court rules on tax certificates
By Amanda Visser (Business Day)
North Gauteng High Court has set aside a decision by the South African Revenue Service (SARS) to suspend the tax clearance certificate needed by a business intending to tender for a government contract.
Sars widens relief for disposal of residences
By David Warneke, (BDO)
On May 29 Sars reissued its guide to the disposal of a residence from a company or trust.
Company directors warned on foolish tax risks
By Willem Oberholzer (BDO)
Willem Oberholzer argues that some company executives are taking huge chances by taking tax positions that are perilously close to tax evasion.
Larger interest deduction possible on long-term projects
By Dirk Kotze (Mazars)
Through various amendments to the Income Tax Act, pre-production interest can now be claimed on land in addition to other assets. This has been re-enforced by the recent deletion of section 11(bA) form the Act. Up to 2009, interest incurred by taxpayers during the set-up or pre-production phase of their trading operation was only claimable in terms of section 11(bA).
BEE and tax
By Dirk Kotze (Mazars)
Broad-based black economic empowerment (BBBEE) has also become a business imperative, and with the updating of the Codes of Good Practice currently underway, is likely to remain so for the foreseeable future.
De Beers Consolidated Mines Limited (503/11) [2012] ZASCA 103 (1 June 2012)
By Dieter van der Walt (SAIT Technical)
The appeal was against the finding of the Tax Court that the VAT charged to the taxpayer by the providers of local services did not constitute deductible 'input tax'.
Cassimjee v Minister of Finance (455-11) [2012] ZASCA 101 (1 June 2012)
By Dieter van der Walt (SAIT Technical)
During 1977 the Department of Customs and Excise seized fuel tankers from the appellant, Cassimjee, based on the allegation that the appellant was selling fuel under rebate to people who did not qualify for the rebate.
SAIT Designations
By SAIT Communications Department
Members in private practice are reminded that the professional designations issued by the Institute are: - Master Tax Practitioner (SA), General Tax Practitioner (SA) and Tax Technician (SA) .
SAQA Visit Institute
By SAIT Communications Department
The South African Qualifications Authority ('SAQA') visited the Institute this week as part of the recognition and accreditation of professional bodies. The purpose of the accreditation visit was to establish the standards and governance of the professional body and to determine whether the designations issued by the Institute can be listed on the National Qualifications Framework.

Technical FAQs
By Dieter van der Walt (SAIT Technical)
The Technical Department dealt with various tax questions during the month of May, including VAT consequenses regarding pre-incorporation expenses, disposal of a residence from trust, dividends tax, independent contractors and international tax.
Average Exchange Rates
By SARS Legal & Policy
SARS issued an updated averange exchange rates for the purposes of section 1 of the Income Tax Act.
Updated Interpretation Note 43 (issue 4)
By SARS Legal and Policy
Circumstances in which certain amounts received or accrued from the disposal of shares are deemed to be of a capital nature contents Download the updated IN here.
UK: Lycamobile is Tories' top corporate donor - but pays no corporation tax
By Rajeev Syal and Solomon Hughes (The Guardian)
A mobile phone company that has paid no corporation tax for three years has become the Conservatives' most generous corporate donor after giving more than 300,000 over the last nine months, new figures show.
US: Shell May Get Pennsylvania Tax Windfall For Ethane Plant
By Romy Varghese (Bloomberg)
Pennsylvania Governor Tom Corbett is asking state lawmakers to authorize $1.65 billion in tax credits for Royal Dutch Shell Plc (RDSA), Europe's biggest oil company, in exchange for building a chemical plant near Pittsburgh.
US: Tobacco firms blitz airwaves to block cigarette tax
By Rory Carroll (Irish Times)
An advertising blitz blitz funded by tobacco companies has eroded Californians' support for a ballot measure to be voted on today to raise taxes on cigarettes, putting the vote's outcome in doubt.
OECD invites comments on certain transfer pricing timing issues
The OECD Secretariat invites public comments on certain timing issues related to transfer pricing, in connection with the work of Working Party No. 6 on intangibles and other projects.
OECD updates Multi-Country Analysis of Existing Transfer Pricing Simplification Measures
The OECD Committee on Fiscal Affairs launched in 2010 a project to improve the administrative aspects of transfer pricing including a review of techniques that may be implemented by countries to optimise the use of taxpayers' and tax administrations' resources.
The South African Institute of Tax Practitioners (SAIT)

PO Box 73, Featherbrooke, 1746
Tel: +2711 662 2837