An examination of the benefits and risks associated with the use of tax opinions

Abstract

South Africa has a complex tax system, which often necessitates taxpayers to consult tax practitioners. Consulting with tax practitioners can result in tax opinions being issued. There is no statutory definition for an opinion available in the South African tax legislation. The use of tax opinions provides a number of benefits to taxpayers, such as providing clarity or certainty of the application of the law and remittance of penalties in limited circumstances. However, tax opinions may also pose a number of risks to taxpayers. Opinions may not be a legal privilege; a legal risk of litigation exists between clients and tax practitioners based on the outcome of tax opinions and consequences in terms of tax legislation, specifically the Tax Administration Act of South Africa with regard to providing wrong opinions. This study explored the meaning of the concept “tax opinion” and examined the benefits and risk associated with the use of opinions.