The draft Tax Administration Laws Amendment Bill of 2015 (“TALAB”), published for public comment on 22 July 2015, proposes the introduction of a new section 42A into the Tax Administration Act No. 28 of 2011 (“TAA”), dealing with the procedures to be followed where legal professional privilege (“Privilege”) is asserted by a taxpayer. These procedures are particularly onerous on the taxpayer and may result in undue delays in the tax dispute resolution process, particularly in relation to discovery proceedings.
The proposed section 42A provides that, if Privilege is alleged in respect of relevant material required by the South African Revenue Service (“SARS”), the person alleging Privilege must submit certain information to SARS at the place, in the format and within the time specified by SARS. This information includes:
- a description of each document in respect of which Privilege is alleged;
- the author of the document, if the author is not a legal practitioner;
- if the author is a legal practitioner, their name and the capacity in which they were acting;
- the specific purpose of the legal advice or in connection with what it was given;
- the name of the client to whom the legal advice was provided;
- confirmation in writing that the client is claiming Privilege in respect of the document; and
- if the document is not in possession of the abovementioned client, the identity of the person from whom it was obtained and the instructions from that person regarding the document.
Once SARS has received this information, it may dispute the allegation of Privilege by arranging with a member of the panel of advocates and attorneys constituted in terms of section 111 of the TAA to take receipt of the relevant document/s. The person alleging Privilege will then be obliged to hand over sealed copies of the relevant document/s. Thereafter, the panel member will make a determination (which is subject to challenge on application to a High Court) as to whether or not Privilege applies.
Given the potential timing implications which the proposed section 42A may have on ongoing and future tax dispute resolution proceedings, it may become necessary (where possible) for taxpayers and their legal practitioners to pre-emptively compile the required information in relation to Privileged material, prior to an anticipated request for information being received from SARS. Alternatively, taxpayers will have to ensure that these onerous processes are taken into account when contemplating the various time frames within which required relevant material must be delivered to SARS, and the potential duration of tax dispute resolution proceedings.