Changes worth noting in the write-off of tax debts

The coming into force of the Tax Administration Act 28 of 2011 (“the Admin Act”) on October 1, 2012 has brought much change to the tax administration landscape. Firstly the Admin Act collates the majority of administrative provisions in the various tax acts under one act. Secondly, new administrative provisions have been introduced relating to, amongst others, the raising of assessments, the levying of interest, the imposition of penalties and the request for write-offs or compromises of tax debts. Notably, however, the sweeping changes brought about by the Admin Act did not apply to the Customs and Excise Act of 1964 (“the Customs Act”). The Admin Act was specifically excluded from applying to the Customs Act. However, this is no longer the case. With the promulgation of the Tax Administration Laws Amendment Act No 21 of 2012 (“the Admin Act”) on December 20, 2012, two significant parts of the Admin Act were made applicable to the Customs Act. These are the parts relating to the write-off or compromise of tax debts and the newly instituted Tax Ombud. Essentially the writeoff or compromise provisions of the Admin Act recognise the fact that taxpayers may be under financial strain. For taxpayers to be compelled to settle their tax debts in full, within the time prescribed by Sars, irreparable financial harm may result. Therefore these provisions grant taxpayers certain remedies, in certain specified circumstances, should they find themselves in such a situation. The taxpayer may request that Sars temporarily writes off their tax debt, allowing for the taxpayer to trade himself into such a situation that will allow him to settle the amount in full. Or, an offer of compromise may be submitted to Sars if the circumstances dictate. That is, an amount less than the full tax debt, but in the circumstances, in the best interests of both the taxpayer and Sars. The tax community is yet to appreciate the value of a Tax Ombud, since the appointment of the ombud is still to be made by the Minister of Finance. However, the news of such a position has on the whole been welcomed. The ombud is under a mandate to review and address complaints by taxpayers with regard to service, procedural or administrative matters. The idea behind the ombud is for complaints to be reviewed and resolved through mediation or conciliation in order to achieve fair and costeffective resolutions. Despite the lack of binding power possessed in the ombud’s hands, it is hoped that reported complaints are dealt with efficiently and effectively and in the interests of administrative justice. The Memorandum on the objects of the Tax Admin Act does however state that the application of the provisions relating to write-offs and compromise of debts are only temporary. Similar provisions, it is believed, are in the advanced stages of drafting in respect of the Customs Duty and Customs Control Bills. Therefore, upon enactment of the Bill, these provisions will no longer be necessary and, as such, will be repealed. However the extended jurisdiction of the Tax Ombud will remain and therefore complaints by persons affected by the application of the Customs Act must be reviewed.