Taxpayers' rights to just administrative action under tax audits : a South African perspective

Abstract

This study inspected section 42 of the TAA in order to create increased awareness among taxpayers and SARS officials of their rights and obligations to ensure just administrative actions during audits and to determine if the TAA is strong enough to protect the rights of taxpayers. A detailed analysis of the mechanisms implemented in South Africa to the taxpayer in enforcing their rights was performed in order to establish if the TAA is applied fairly and justly. It was found that due to specific lack of tax law enforcement and independence of the various institutions, the taxpayer often has to revert to court to have their rights protected. Relevant court cases were inspected to establish whether SARS has acted within their boundaries. It seems as if the rights of taxpayers to be informed of the progress of the audit and stage of completion thereof as contained in section 42 of the TAA was successfully challenged in court by the taxpayers. A comparison was done between South Africa, Canada and the UK in applying the different mechanisms available to evaluate if the mechanisms are strong enough to protect the rights of taxpayer’s during audit verifications. The rights of the taxpayers in Canada and the UK are specifically protected by law and independent bodies. The effectiveness of their service to taxpayers in protecting the rights of taxpayers is good compared to the poor rate in South Africa in protecting the rights of taxpayers. A few recommendations were made in order to improve the current tax system, or mechanisms in South Africa to protect the taxpayer’s rights to administrative fairness with more efficient remedies: • Legislating a Taxpayer’s Bill of Rights which would be the foundation for the taxpayer’s rights to be protected; • Implementing a SARS Service Charter which details the manner in which SARS has to deliver services in a fair and just method toward taxpayers; and • Improving the powers afforded to the Tax Ombudsman and the independence thereof. It was evident from the study performed that even if the taxpayer has supplied all information, SARS often neglects to respond to the taxpayer within the time frame or even at all. It seems that the duty of SARS to keep the taxpayers informed during audits are not effectively addressed by the TAA, the Constitution and PAJA.