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South Africa: Expanded use of taxpayer inquiries anticipated

South Africa: Expanded use of taxpayer inquiries

Because the South Africa Revenue Service (SARS) missed its revenue collection targets for the financial year ended 31 March 2019 and given the additional pressure with respect to revenue collection, SARS may make greater use of its information gathering authority.

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SARS plans to reconstitute the Large Business Centre, to strengthen its information technology systems and to re-establish the illicit economy unit may improve tax collections. Nevertheless, taxpayers may find greater pressure from SARS to collect revenue. Recalcitrant taxpayers or taxpayers with complex tax planning structures can expect intense scrutiny through greater use of provisions of the Tax Administration Act, including the “inquiry proceedings” contained in section 50.

Section 50 inquiries are established by order of a judge of the High Court on application by SARS. An inquiry can be established when there are reasonable grounds to believe that a person has failed to comply with an obligation under a tax act; committed a tax offence; or disposed of, removed or concealed assets that may fully or partly satisfy an outstanding tax debt. In order to succeed in the request, SARS must demonstrate that there are reasonable grounds to believe that relevant material is likely to be revealed during the course of the inquiry which may provide proof of the action, omission or offence alleged.

Inquiry orders increasingly have been granted against corporate taxpayers—especially when the position of SARS is that the subject taxpayers are in some way involved in what SARS considers to be tax avoidance schemes or when large scale value added tax (VAT) fraud and tax evasion may be suspected.

A closer examination of the provisions of section 50 reveals that the provisions are generally applicable, and not only when criminal investigation is likely. In addition, persons called to account at an inquiry need not be the person or taxpayer under scrutiny (for example, SARS could be seeking information on suppliers or customers of the person called to the inquiry).


Read an April 2019 report [PDF 80 KB] prepared by the KPMG member firm in South Africa

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