Monthly Archives: July 2016

SARS prescription

A2Imagine the following scenario: a taxpayer named Andrew is on his annual vacation for four weeks. On the fifth day of his vacation, he is lying carefree in the sun with his toes wiggled into the warm beach sand. A thought crosses his mind: perhaps he must check his email for a change.

Fast forward eight hours: Andrew logs in to his email. He gives the emails in his inbox a quick scan. Suddenly his stomach cramps. His heart beats faster. His hands start to sweat. His eye caught an email from SARS. Andrew opens the email and then the attachment reluctantly. The attachment contains a letter from SARS stating that they are going to re-assess his income tax for a specific tax year. The assessment for that particular tax year has been issued more than four years ago. Can SARS do this?

To be subjected to the prescription (or re-opening) of an assessment that has been finalised a few years ago already, is something taxpayers don’t even want to contemplate. However, in terms of the new Tax Administration Act, 28 of 2011 (TAA) SARS may go back more than three tax years into the past, prescribe and re-assess a tax return but only if the Commissioner is objectively, based on the facts, satisfied that both the following statutory requirements are met:

  1. There was fraud, misrepresentation or non-disclosure of material facts.

“Fraud” is defined as an unlawful act committed with the intention of misleading another person. The misleading information must cause the other person to act differently than they would have acted if they were not given the misleading information.

The legal meaning of “misrepresentation” refers to a false statement made by a person, regardless of whether the statement is made negilently, fraudulently or innocently. Misrepresentation does not include the expression of an opinion or an interpretation of law.The taxpayer must have made a positive statement which contained one or more facts that were untrue.

Note that innocence cannot be pleaded as an excuse for misrepresentation. Taxpayers thus have to make sure about the content of any statement they make regarding their tax affairs before making such a statement.

“Non-disclosure” means failure to reveal a fact if there is a duty to disclose it. Whether or not there is an intention to conceal it is irrelevant.

  1. The above fraud, misrepresentation or non-disclosure of the material facts was the direct cause that the taxpayer had been assessed for a lower amount of tax than if the taxpayer had disclosed these material facts referred to in section (i) above, to SARS.

There must be evidence of a direct link between the non-disclosure or misrepresentation of the material facts and the taxpayer paying too little tax. If the fraud, non-disclosure or misrepresentation of the material facts did not cause the taxpayer to be liable for less tax than he was assessed for without the material facts, the second requirement listed above is not met and SARS shouldn’t be able to apply this section of the TAA.

Generally the onus of proving that income is not taxable or that an expense is tax-deductable rests with the taxpayer. However, if SARS wants to apply the provisions of this section of the TAA, the onus of proving that the above requirements are met, rests with the Commissioner.

It seems that if the fraud, non-disclosure or misrepresentation of material facts did take place but did not cause the taxpayer to pay less tax than if SARS had been in possession of these material facts, and SARS would have assessed the taxpayer in exactly the same way as with the original assessment, despite SARS becoming aware of the material facts now, SARS cannot claim that the under-assessment was due to that fraud, non-disclosure or misrepresentation of the material facts.

If SARS wants to issue an additional assessment on the basis of requirement (i) above but requirement (ii) is not met, the taxpayer can deal with this situation using the objection and appeal provisions available.

In the light of SARS’s tools to go back and prescribe assessments for old tax years, it might be prudent to keep tax records for longer than the required retention periods prescribed by SARS.

Reference List:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Bail or not

A1People are often outraged when they hear of accused persons who have been released on bail. In this article the factors to be considered when deciding whether someone should be let out on bail or not will be discussed. This will allow us to better understand why someone has been released on bail or why they have not.

According to section 35(1)(f) of the Constitution[1] everyone who is arrested for allegedly committing an offence has the right to be released from detention if the interests of justice permit, subject to reasonable conditions. This provision sets out that the law cannot take away an innocent person’s freedom arbitrarily but recognises that in certain circumstances it may be in the interests of justice to take away or limit this freedom.[2]

The next question that arises is how we know when the refusal to grant bail is in the interests of justice. According to section 60(4) of the Criminal Procedure Act[3] (CPA) the interests of justice do not permit the release from detention of an accused where one or more of the following grounds are established:

  1. Where there is the likelihood that the accused, if released on bail, will endanger the safety of the public or any particular person or will commit certain offences;
  2. Where there is the likelihood that the accused, if released on bail, will attempt to evade trial;
  3. Where there is the likelihood that the accused, if released on bail, will attempt to influence, intimidate or conceal witnesses or destroy evidence;
  4. Where there is the likelihood that the accused, if released on bail, will undermine or jeopardise the objectives or the proper functioning of the criminal justice system, including the bail system;
  5. Where there is the likelihood that the release of the accused will disturb the public order or undermine the public peace or security.[4]

In considering whether the grounds in (a) to (e) above have been established various factors, which are set out in Sections 5 – 9 of the CPA, may be taken into consideration, which include the following:

  • the degree of violence towards others implicit in the charge;
  • the accused’s ties to the place at which he or she is to be tried;
  • assets and travel documents held by the accused;
  • the accused’s relationship with the witnesses and the extent to which they could be influenced;
  • whether the accused supplied false information during his or her arrest or bail proceedings;
  • any previous failure to comply with bail conditions or indications that he or she will not comply with any bail condition;
  • whether the nature of the offence or the circumstances under which the offence was committed is likely to induce a sense of shock or outrage in the community; and
  • whether the shock or outrage of the community might lead to public disorder if the accused is released.[5]

The court decides whether the accused should be let out on bail by weighing the interests of justice against the right of the accused to his or her personal freedom and in particular the prejudice he or she is likely to suffer if he or she were to be detained in custody, and must take into account, inter alia, the period for which the accused has been in custody; the probable period of detention until the end of the trial if bail is not granted; the reason for any delay in the trial and any fault on the part of the accused; any impediment to the preparation of the accused’s defence due to the detention of the accused, and the accused’s state of health.[6]

When dealing with Schedule 5 and 6 offences the accused will be detained in custody unless the accused can show the court that it is in the interests of justice or that exceptional circumstances exist which permit his or her release, respectively. [7]

We can see from this article that the court must weigh up many factors against each other and although we do not always understand why accused persons are released on bail, anyone would want a fair bail application if they found themselves in that same position.

Bibliography:

  • The Constitution of the Republic of South Africa, 1996
  • J Chaskalson & Y De Jong – Criminal (In)Justice in South Africa, 2009:86
  • The Criminal Procedure Act 51 of 1977

[1] The Constitution of the Republic of South Africa, 1996.

[2] J Chaskalson & Y De Jong – Criminal (In)Justice in South Africa, 2009:86.

[3] Section 60(4) of the Criminal Procedure Act 51 of 1977.

[4] Section 60(4) of the Criminal Procedure Act 51 of 1977.

[5] Section 60(5-9) of the Criminal Procedure Act 51 of 1977.

[6] Section 60(10) of the Criminal Procedure Act 51 of 1977.

[7] Section 60(11-12) of the Criminal Procedure Act 51 of 1977.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)