Tax administration : a comparison between income tax act and the tax administration act : assessments, objections, penalties and interest

Abstract

Tax administration sections have always formed part of the tax legislation in South Africa. South Africans have been warned for years of the introduction of separate legislation to govern the tax administration sections of all the applicable tax Acts. This became a reality with the introduction of the Tax Administration Act (TAAct) on 1 October 2012. This study will focus on the changes from the Income Tax Act to the Tax Administration Act in relation to assessments, objections, penalties and interest. All the different types of assessments have now been defined under the Tax Administration Act. We also see the introduction of a new type of assessment in the form of a jeopardy assessment. This type of assessment can be raised by a senior SARS official where the Commissioner is satisfied that the collection of taxes may be in jeopardy. The biggest change regarding objections is the change to the timeframe in which a taxpayer is allowed to lodge an objection. Under the Tax Administration Act, an objection has to be lodged within 30 business days after the date of the assessment and not within 30 business days after the due date as under the Income Tax Act. Furthermore, SARS will now be obliged to provide taxpayers with detailed reasons for assessments. The administrative non-compliance penalties that formed part of the Income Tax Act have now been combined under one chapter in the Tax Administration Act. The biggest change with regard to penalties can be seen in the movement from the additional tax penalty (old 200% penalties) to the new understatement penalty. Taxpayers will need to ensure that they are aware of the possible implications they may face under the Tax Administration Act. It has now become even more important for taxpayers to seek the advice of qualified tax practitioners when faced with complex tax matters. This will assist the taxpayer in preventing unwanted penalties being raised and would ensure compliance in respect of their tax affairs.