As indicated in the tax proposals of the 2012 Budget Speech, by mid-February 2012, the South African Revenue Service (“SARS”) had captured 17 938 applications for voluntary disclosure relief in terms of the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act No. 8 of 2010 (“the VDP Act”) and concluded agreements to the value of R941 million in this regard. Voluntary disclosure applications in terms of the VDP Act were required to be submitted to SARS by 31 October 2011.
In order to enhance ongoing voluntary compliance subsequent to the conclusion of the voluntary disclosure programme (“VDP”) offered in terms of the VDP Act, Part B of Chapter 16 of the Tax Administration Bill (“TAB”) proposes a permanent legislative framework for the disclosure of defaults relating to all tax types, other than customs and excise.
The TAB was passed by parliament on 7 December 2011 and the current status of the TAB as indicated on the Parliamentary Monitory Group website is “to be sent for assent”. Accordingly, the TAB has been sent to the President for signature and could be promulgated at any time. The TAB comes into operation on a date to be determined by the President by proclamation in the Gazette and it was indicated in the 2012 Budget Speech that the TAB is expected to be promulgated and most of its provisions brought into force in 2012.
Clause 227 of the TAB sets out the requirements for a valid voluntary disclosure as follows:
- the disclosure must be made on a voluntary basis;
- the disclosure must involve a “default” which has not previously been disclosed;
- the disclosure must be full and complete in all material respects;
- the disclosure must involve the potential imposition of an understatement penalty in respect of the “default”;
- the disclosure should not result in a refund due by SARS; and
- the disclosure is to be made in the prescribed form and manner.
In addition to the above, in terms of clause 226 of the TAB, a taxpayer would not qualify for voluntary disclosure relief if such taxpayer is aware of a pending or ongoing audit or investigation into its affairs unless a senior SARS official directs otherwise under specific circumstances.
In comparing the requirements for a valid voluntary disclosure in terms of the TAB with the requirements for a valid voluntary disclosure as applied in terms of the VDP Act, it is noted that the VDP Act contained two further requirements for a valid voluntary disclosure: that the disclosure be made within the period prescribed by the Commissioner (i.e. between 1 November 2010 and 31 October 2011) and that the disclosure be in respect of a default which occurred prior to 17 February 2010. Accordingly, on the basis that the TAB is silent on the period within which the default must have taken place, and the VDP Act expressly indicated a period within which the default had to have occurred, it may be argued that the legislature intended for the VDP offered in terms of the TAB to apply in respect of defaults which occurred prior to and/or after the commencement date of the TAB – provided that such defaults were not previously disclosed.
In terms of the requirement that there must be a “default” in order for a valid voluntary disclosure to be made, a “default” is defined in clause 225 of the TAB as, broadly speaking, the submission of incomplete or inaccurate information to SARS or the failure to submit information or the adoption of a tax position where such resulted in -
- the taxpayer not being assessed for the correct amount of tax;
- the correct amount of tax not being paid by the taxpayer; or
- an incorrect refund being made by SARS.
The relief proposed to be granted in terms of the VDP offered by the TAB is as follows:
- no criminal prosecution for a statutory offence under tax legislation arising from the “default” or a related common law offence;
- relief in respect of any understatement penalty referred to in column 5 or 6 of the understatement penalty percentage table contained in clause 223 of the TAB; and
- 100 per cent relief in respect of an administrative non-compliance penalty that may be imposed in terms of the TAB or a penalty imposed in terms of a tax Act - subject to exclusions, which generally comprise penalties levied for the late submission of a tax return.
The VDP relief proposed in terms of the TAB therefore does not include relief from interest as was previously provided for in the VDP Act.
The VDP relief contained in the TAB is therefore not as favourable as was previously provided for in the VDP Act. However, the potential VDP relief provided for in the TAB may be seen as a “bonus” to defaulting taxpayers who did not make use of the VDP as contained in the VDP Act and it is recommended that such taxpayers become better acquainted with the penalties they may face in terms of the TAB and the possible VDP relief which may be available in this regard - provided the requirements as set out above are complied with.