National Treasury and the South African Revenue Service (SARS) published the 2020 Draft Taxation Laws Amendment Bill (Draft TLAB), and the 2020 Draft Tax Administration Laws Amendment Bill (Draft TALAB) for public comment at the end of July.
While the two bills address a number of issues – including changes to carbon taxes and export taxes – commenters have drawn specific attention to one of the proposed amendments in the Draft TALAB that could have serious consequences for taxpayers.
Louise Kotze, associate designate at law firm Cliffe Dekker Hofmeyr, said that the issue revolves around the removal of the element of wilful conduct in respect of tax-related offences.
“Barring very specific circumstances, it is a commonly accepted principle in South African law that in order to secure a conviction in respect of a criminal offence, fault on the part of the accused – either in the form of intent or negligence – must be demonstrated,” she said.
She added that there are various provisions in the tax Acts which provide that specified types of conduct by a taxpayer will constitute an offence, in respect of which the taxpayer may be liable for a fine or imprisonment. These include:
- Paragraph 30 of the Fourth Schedule to the Income Tax Act 58 of 1962;
- Section 58 of the Value Added Tax Act 89 of 1991; and
- Section 234 of the Tax Administration Act 28 of 2011 (TAA).
“Previously, each of these provisions required that a taxpayer must commit the relevant act ‘wilfully and without just cause’ before the taxpayer could be found guilty of the offence.
“The Draft TALAB proposes to amend the wording of these three provisions by removing the term ‘wilfully‘ from the legislation, thereby removing the obligation on SARS to prove intent before a taxpayer can be found guilty of one of these offences,” said Kotze.
The draft memorandum that was published with the Draft TALAB explained that the reason for the proposed amendment is that the term “wilfully” denotes only intention on the part of the taxpayer and does not encapsulate the other type of fault, being negligence.
It is Treasury’s objective to hold taxpayers liable for either their wilful or their negligent conduct that may lead to an offence in terms of the aforementioned provisions, and not just the conduct that is wilful.
“From the explanation provided in the draft memorandum, it appears that the intention of National Treasury and SARS is not to relieve SARS of its obligation to prove fault on the part of the taxpayer, but rather to specify that the element of fault includes both intent and negligence,” said Kotze.
“As such, at least one of these components of fault must be proven before a taxpayer may be found guilty of an offence.
“Given this rationale, it remains to be seen whether the current wording of the proposed amendment will be adjusted to make the intention of National Treasury more readily apparent,” she said.