The 2020 Draft TLAB and Draft TALAB are in! An overview and the issue of wilful conduct

The media statement accompanying the publication of the bills (Media Statement) indicated that the Draft TLAB gives effect to various key tax proposals, including:

• The introduction of export taxes on scrap metals;
• Tax measures required as a result of the modernisation of the foreign exchange control system;
• Aligning the carbon tax fuel levy adjustment with the Carbon Tax Act;
• Addressing an anomaly in the tax exemption of employer provided bursaries;
• Allowing a carbon tax “pass through” for the regulated liquid fuels sector; and
• Clarifying rollover relief for unbundling transactions.

The Media Statement also specified the key tax proposals contained in the Draft TALAB, such as:

• The amendments enabling the proposed introduction of an export tax on scrap metals;
• The refusal by SARS to authorise a refund where returns are outstanding under the Skills Development Levies Act and the Unemployment Insurance Contributions Act; and
• The withholding of a refund pending a criminal investigation.

In this article, we briefly look at one of the proposed amendments in the Draft TALAB that could have serious consequences for taxpayers. 

Removal of the element of wilful conduct in respect of tax related offences

Barring very specific circumstances, it is a commonly accepted principle in South African law that in order to secure a conviction in respect of a criminal offence, fault (either in the form of intent or negligence) on the part of the accused must be demonstrated.

There are various provisions in the tax Acts which provide that specified types of conduct by a taxpayer will constitute an offence, in respect of which the taxpayer may be liable for a fine or imprisonment. Among these provisions are:

1. Paragraph 30 of the Fourth Schedule to the Income Tax Act 58 of 1962;
2. Section 58 of the Value Added Tax Act 89 of 1991; and
3. Section 234 of the Tax Administration Act 28 of 2011 (TAA).

Previously, each of these provisions required that a taxpayer must commit the relevant act “wilfully and without just cause” before the taxpayer could be found guilty of the offence. The Draft TALAB proposes to amend the wording of these three provisions by removing the term “wilfully” from the legislation, thereby removing the obligation on SARS to prove intent before a taxpayer can be found guilty of one of these offences.

The Draft Memorandum on the Objects of the TALAB, 2020 (Draft Memorandum) that was published with the Draft TALAB explained that the reason for the proposed amendment is that the term “wilfully” denotes only intention on the part of the taxpayer and does not encapsulate the other type of fault, being negligence. It is NT’s objective to hold taxpayers liable for either their wilful or their negligent conduct that may lead to an offence in terms of the aforementioned provisions, and not just the conduct that is wilful.

From the explanation provided in the Draft Memorandum, it appears that the intention of NT and SARS is not to relieve SARS of its obligation to prove fault on the part of the taxpayer, but rather to specify that the element of fault (as it applies to these provisions) includes both intent and negligence. As such, at least one of these components of fault must be proven before a taxpayer may be found guilty of an offence. Given this rationale, it remains to be seen whether the current wording of the proposed amendment will be adjusted to make the intention of NT more readily apparent.

Public consultation process

The public now has an opportunity to submit comments to NT and SARS regarding this proposed amendment and any other proposed amendments in the Draft TLAB and Draft TALAB. The deadline for public comments is 31 August 2019. The Media Statement indicates that due to the national lockdown regulations, further information will be provided regarding the manner and platform of public engagements to discuss the written comments, which in prior years took place in person.

In the coming weeks, we will discuss some of the other proposals in the Draft TLAB and Draft TALAB.