Tighter controls over tax advisers
Tax practitioners could be forced from July next year to belong to an organisation with disciplinary powers that is recognised by the South African Revenue Service (SARS). This is in terms of an amendment to the Tax Administration Act that has been approved by Parliament and is expected to be signed into law any day now.
About 17 000 tax practitioners, or half of the 34 000 who help taxpayers to complete their tax returns, do not belong to a professional organisation. Should these practitioners not find an organisation that will accept them by the July deadline, they will not be able to assist you with your tax return without committing an offence under the amended law.
Although the deadline to register is just over six months away, most of the organisations that represent tax advisers have welcomed the amendment and expect it will remove the bad apples from the profession.
National Treasury and SARS have long been concerned that you could be advised by a practitioner without any qualifications or experience and who is not governed by a code of professional conduct.
In addition, there are not enough controls to ensure that you receive advice consistent with the tax legislation, Treasury and SARS say.
Stiaan Klue, chief executive of the South African Institute of Tax Practitioners (Sait), says the regulation of tax advisers has been long-awaited and is needed desperately.
Once enacted, the Tax Administration Laws Amendment Bill will require anyone who submits any document to SARS on your behalf in return for payment to register with a body that is recognised by the Commissioner of SARS.
The bill provides for automatic recognition as a controlling body for the Independent Regulatory Board for Auditors, the law societies, the General Council of the Bar of South Africa, the bar councils and the societies of advocates.
It is expected that professional bodies such as the South African Institute of Chartered Accountants (Saica), the South African Institute of Professional Accountants (Saipa) and Sait will also be recognised. The Financial Planning Institute (FPI) is considering whether it needs to be recognised as a controlling body for tax practitioners and is exploring affiliate membership with Sait.
According to the explanatory memorandum to the bill, SARS will review the professional bodies that seek recognition to ensure they:
* Require their members to have minimum levels of qualification and experience;
* Provide their members with continuing professional development (CPD);
* Have a code of ethics and conduct; and
* Have a disciplinary procedure to deal with members who contravene their code.
The bill proposes that in order to be recognised by SARS, a professional association must have at least 1 000 members, or must attract at least 1 000 members in its first year of existence.
The Tax Administration Act became effective in October. It provides that anyone who helps you to fill in your tax return for a fee must be registered with SARS as a tax practitioner or they will be guilty of an offence. If convicted, they can be sentenced to a fine or imprisonment of up to two years. Currently, registration with SARS does not require a fee or a qualification.
The Act allows SARS to refuse to register someone as a practitioner if he or she has been removed from a professional body for misconduct, or has been convicted of a crime involving dishonesty in the preceding five years.
Klue says SARS’s Strategic Plan 2012–2017 reveals that tax practitioners who are not registered with a professional body have worse levels of compliance than those who are. According to the Strategic Plan, non-registered practitioners owe SARS on average four times more tax than do practitioners who belong to a professional body.
In his Budget speech earlier this year, Finance Minister Pravin Gordhan said tax practitioners owe R260 million in tax and have 18 000 income tax returns outstanding in their personal capacities.
SARS told Parliament’s finance portfolio committee that it is in talks with professional bodies that are likely to be recognised about what will be required of them.
Piet Nel, project manager at Saica, says Saica expects it will be approved as a controlling body in time to meet the July deadline.
Nel says he is concerned about the 17 000 tax practitioners who are helping taxpayers to complete their returns but do not belong to a professional organisation.
Saica admits only chartered accountants and will not lower its standards to allow practitioners who do not meet its qualification criteria to join it, he says.
The amendment to the Tax Administration Act could lead to a reduction in the number of tax practitioners, which could result in taxpayers having to pay more for tax advice, Nel says. However, Franz Tomasek, general manager for legislation at SARS, says some of the associations plan to make an effort to provide a home for practitioners who are not currently members of a body. Competition will thus remain as a check on excessive fees, Tomasek says.
Some people have registered with SARS as tax practitioners only so they can access the services that SARS offers to registered practitioners, such as shorter queues at branches, and it is expected that these people will not try to register once the amendment takes effect.
Nel says there is a definite need for practitioners who can help taxpayers whose tax affairs are relatively simple. Practitioners among Saica’s membership expect to be consulted by taxpayers whose tax affairs are more complex, he says.
Ettiene Retief, chairperson of the national tax committee at Saipa, says Saipa embraces the regulation of tax practitioners.
Saipa is engaging with SARS about what it will be required to do to ensure that it offers its members an appropriate CPD programme, and that the organisation’s disciplinary procedures and codes of conduct meet SARS’s requirements.
Retief says Saipa is considering introducing a new tier in its membership for tax practitioners who are not accountants but have appropriate experience in tax. However, the organisation will definitely not admit unqualified tax practitioners.
Klue says Sait believes it is equipped to be recognised as a controlling body, because it has minimum qualification and experience requirements for its members, tax-focused CPD, a code of ethics and conduct specific to tax practitioners, and a disciplinary procedure.
Klue says Sait has the following levels of membership:
* Tax technician, which requires a Certificate in Tax, plus one year’s practical experience;
* General tax practitioner, for which you must be a chartered accountant, a tax attorney, a Saipa professional accountant, or an FPI-accredited financial planner, plus have three years’ experience in tax, law and/or accounting; and
* Master tax practitioner, which requires the above qualifications and experience, plus a postgraduate tax qualification.
Sait will consider recognising prior learning and subjecting would-be members to a competency exam, Klue says.
Members are required to submit a certificate of tax compliance to Sait annually, he says.
The memorandum to the Tax Administration Laws Amendment Bill says the effectiveness of the amendments relating to tax practitioners will be reviewed 18 months after they have been enacted. A second phase of regulation, involving the introduction of an independent board for tax practitioners, may be implemented, unless the review proves that this is not necessary.
MINISTER WILL HAVE THE POWER TO FORCE ORGANISATIONS TO DISCIPLINE MEMBERS
A tax practitioner who fails to file your return, or who gives you improper advice, could be expelled from his or her controlling body and, as a result, be unable to practise once amendments to the Tax Administration Act are enacted.
To ensure that tax practitioners are regulated effectively through professional organisations, the Tax Administration Laws Amendment Bill gives the Minister of Finance the power to ensure that practitioners who need to be disciplined are dealt with by their controlling body and, if necessary, deregistered.
Once the bill is enacted, the Minister of Finance will have the power to appoint a panel of retired judges, or people of similar stature and competence, to decide on a complaint on behalf of a professional association if the association does not have the capacity, or is unwilling, to address a complaint by the South African Revenue Service (SARS) against a tax practitioner who belongs to the association. According to the explanatory memorandum to the bill, the cost of the panel’s dealing with the complaint will be borne equally by the controlling body and SARS.
The Tax Administration Laws Amendment Bill also provides for a senior SARS official to be able to lodge a complaint with a recognised controlling body if a registered tax practitioner has, in the opinion of the official, prepared or submitted your tax return without exercising due diligence, unreasonably delayed the finalisation of any matter before SARS, or been grossly negligent.
Stiaan Klue, chief executive of the South African Institute of Tax Practitioners (Sait), says the requirement to exercise due diligence means that a tax practitioner will not be able to hide behind an outdated tax law, be negligent or do a rush job.
Klue says “due diligence” is not defined in the Tax Administration Act, and he has suggested that SARS establish a council to issue minimum standards to guide tax practitioners, in the same way that there are auditing standards for auditors.
It would also help members of the public if they knew there were minimum standards to which tax practitioners must adhere, he says.
Sait published standards for its members in 2011 based on the global standards issued by members of the International Tax Directors’ Forum, Klue says.
The Tax Administration Laws Amendment Bill also enables an official from SARS to complain to a controlling body if a tax practitioner has, either recklessly or through gross incompetence, provided a taxpayer with an opinion that is clearly contrary to the tax legislation, or has knowingly provided SARS with false or misleading information in connection with your taxes.
SARS can complain to a controlling body if one of its members attempts, directly or indirectly, to influence a SARS employee by way of threats, false accusations, duress or coercion, or by offering gifts, favours or special inducements.
TAX ADVISERS CAN’T KEEP A SECRET
Tax practitioners do not enjoy the same professional privilege as do lawyers when it comes to client disclosures about contraventions of the law.
This means that while lawyers can be given information about offences, and can offer advice on how to deal with these offences, without being obliged to disclose this information to a law enforcement agency, tax practitioners can be forced to disclose information, or hand over documents, about clients’ tax offences to the South African Revenue Service (SARS).
During hearings in Parliament on the Tax Administration Laws Amendment Bill, leading tax companies and organisations that represent tax practitioners argued for tax practitioners to be given limited professional privilege.
The South African Institute of Chartered Accountants (Saica) said it would be in the public interest to encourage taxpayers to communicate with their tax advisers in the knowledge that such communication would be confidential and protected.
Saica said most tax advice is provided by people who are neither attorneys nor advocates, and therefore they are not protected by the common law principle of professional privilege.
Parliament also heard that tax practitioners represent their clients in the Tax Court.
In its response, SARS said professional privilege could be granted only to tax practitioners who are regulated by law and not those who are self-regulated.
The matter should be revisited if the second phase of the regulation of tax practitioners is introduced through an independent board for tax practitioners, SARS said.