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.