Abstract:
The South African Revenue Service has for many years found it difficult to collect sufficient
amount of tax from a limited taxpayer base. It has therefore sought to increase the range of its
collections efforts by including in legislation several aggressive collections actions such as
attributing a tax liability of a company to its representative taxpayer. It appears from reading
the enabling provisions of the Act that the legislature omitted to determine the exact manner
in which such tax debt should be attributed. This is precariously done by issuing the
representative taxpayer with a notice informing him/ her of his/ her suspected liability and
thereafter blindly attributing the tax debt without notice of assessment.
If compared to the South African Companies Act, Act 73 of 2008 it becomes apparent that in
instances where a director has been found to have violated his fiduciary duties and
contributed or caused a debt to be unpaid he would only become liable through the operation
of law. Simply an aggrieved party must upon application to the relevant court prove gross
negligence, fraud or an unconscionable abuse by the director concerned before the court will
deem such person to be liable. The courts have the benefit of decided cases to assist them in
making an objective determination whether a person becomes liable or not.
Contrary to the South African Revenue Service's its Australian counterpart has
through their legislators found it wise to, in similar circumstances, impose a penalty to a
suspecting defaulting director. The director would be given a determined amount of time to
remedy the default after which, if left unpaid, a penalty equal to the liability would be
imposed upon the director. The Australian Tax Authority has also sought to include various
defences a suspecting defaulting director may rely on to refute any claim of liability. This
approach is seen to be pragmatic and pro-active as it allows the Australian Tax Authority to
mitigate any real loss it may incur.
In my dissertation, I will evaluate and compare the different approaches of attributing
a liability of the delinquent company to its representative in differing fields of law and
jurisdictions. In the comparison, it will be shown that the manner in which a tax debt is
attributed to a representative taxpayer is just as important for the reason a revenue authority
would want to attribute a tax debt to a representative taxpayer. The purpose of the
comparison is to highlight the effectiveness of the different approaches and the burden of
proof that needs to be overcome by a complaining party. In the dissertation, it will become evident that, despite moral and judicial justification for attributing a tax debt of a delinquent
company to its representative taxpayer, there are debilitating shortcomings in the South
African Revenue Service's current approach.
