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Tax appeals: ‘Not enough time’

| Economic factors

The South African Institute for Tax Professionals (SAIT) has requested that taxpayers be allowed at least 90 days to prepare their objections to assessments, especially in complex matters.

The current period for lodging an objection under the Tax Administration Act is 30 business days from the date of assessment. National Treasury acknowledged in the February budget that the time has been shown to be too short in practice.

This has resulted in a large number of applications for condonation for late objections. Treasury proposed a longer period for lodging an objection and condonation be considered.

An aggrieved taxpayer may request reasons for an assessment from the South African Revenue Service (SARS) within 30 days from receiving the assessment.

If not satisfied with the reasons, the taxpayer may object to it, still within the 30-day period. However, a senior SARS official may extend the 30-day period if he is satisfied there are reasonable grounds for a delay in lodging an objection.

The extension may not exceed 21 days - giving the taxpayer 51 days in total to lodge the objection. To object beyond the 51 days, the taxpayer must show that there are "exceptional circumstances".

According to SAIT getting an extension beyond the 51 days is "very rare".

"In practice, it appears to be virtually impossible to lodge an objection once the 51-day cut-off has elapsed. This is particularly prejudicial to a taxpayer that has good substantive grounds to contest an assessment."

The institute suggests a 90-day period in instance of substance over form, general anti-avoidance rules and transfer pricing investigations, as well as during corporate formations and reorganisation transactions.

The additional 21 days does not offer sufficient relief. "All taxpayers have greater problems responding to SARS requests when they are open-ended or the underlying information in dispute is extensive," says SAIT

When matters are complex and information intensive, there should be an automatic 90-day period available. Some matters require a more "discretionary analysis" than the extensions which exist currently, the institute states.

SAIT admits that people also tend to ignore the process at their own peril. Taxpayers should take immediate action once they have received an assessment from SARS with which they disagree.

The institute advises taxpayers not to close their eyes and bury their heads in the sand. "That is a sure way to lose your right to object."

SAIT also requests that the "bad few" should not affect the rights of many legitimate taxpayers. "In any event SARS has the power to collect on the pay-now-argue-later principle or can request some type of security."

This will assist in weeding out instances where more accommodating objection timeframes are being abused.

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