The relationship between the South African Revenue Service (Sars) and the recognised controlling bodies (RCBs) in regulating the tax profession is aimed at safeguarding uniform standardisation and enforcement of professional rules and standards to enhance professionalism within the field of taxation. In recent years, there has been more robust engagement between relevant RCBs and Sars By Adrian Modikwe
Section 240 of the Tax Administration Act (TAA) requires all tax professionals in practice to register with an RCB and Sars. Without RCB and Sars registration, an individual has no legal and regulatory authority to act as a tax practitioner or render tax services for a fee.
Failure to comply with the provision may result in criminal prosecution against the offending individual. Furthermore, a default in the proper maintenance of compliance with RCB standards, including tax practitioner compliance requirements, may lead to disciplinary measures, including revocation of professional membership and registration with Sars.
Operating as a tax practitioner without the necessary registration constitutes a criminal offence. Consequently, if convicted, the tax practitioner may be liable for substantial financial penalties and/or imprisonment.
The utility in RCB membership is glaring as they play multiple roles in the professions under their exclusive regulation. Apart from regulation and professional recognition, a tax professional gains access to services such as compliance and technical support services. A value-added support benefit for members of the South African Institute of Taxation (SAIT), for example, lies in this institute’s ability to foster proper representation, facilitate relevant education and deliver unprecedented access to Sars through direct escalation networks.
Compliance with professional and ethical standards
In terms of professional regulation, a member gets to understand their role and obligations in the larger professional community. SAIT maintains professional and compliance standards by setting membership eligibility and retention criteria, tailor-made codes of conduct that incorporate Sars regulations and relevant statutory requirements. Additionally, SAIT members are provided with useful guidelines on diverse ethical standards to apply when confronting professional/ethical dilemmas.
We briefly examine two prominent areas of non-compliance with relevant codes, rules and standards of professional conduct, namely disciplinary records and contingency fees.
- Disciplinary records – general
Although listing all potential reasons for disciplinary action or deregistration is challenging, disciplinary history is worth noting. Members who fail to abide by RCB codes and Sars standards may be found to be negligent or otherwise guilty of unprofessional conduct (for example, failing to timeously and properly file tax returns).
Depending on the merits of each case, sanctions range from formal reprimands, financial fines and membership suspension to termination of membership. Operating within prescribed professional and ethical standards is a foolproof way to ensure an immaculate disciplinary record which inevitably affects a tax practitioner’s standing, as RCB disciplinary records are distributed to Sars annually.
- Contingency fees
Another example is raising contingency fees against taxpayer refunds which creates a “perverse incentive”, resulting in a conflict of interest affecting a practitioner’s integrity and objectivity. This may eventually obstruct the administration and collection of tax revenue. The return itself cannot give rise to any contingency fee, the extent of any refund or “saving” can be determined only once Sars raises the assessment. It is only then that the contingency fee might arise and the amount thereof be reasonably quantifiable. Therefore, at face value, contingency fees can allow a tax practitioner to charge fees that are not commensurate with the work done.
Compliance with regulatory requirements
SAIT evaluates and monitors member compliance with industry-specific regulations and statutory requirements enforced by Sars. The main focus areas in terms of regulatory compliance requirements are:
- Individual/personal tax compliance
Tax practitioners should be aware that Sars has the power to deregister tax practitioners under the TAA due to:
a) Non-compliance with tax (Section 240(3)(d)).
b) An existing criminal record and conviction for crimes involving dishonesty and/or fraud (Section 240(4)).
Tax practitioners are expected to lead by example by ensuring that their personal tax affairs are always in good standing. Default in preserving personal tax compliance (that is, tax debt or general tax non-compliance) raises doubts within Sars and SAIT about the quality and standards of a defaulting tax practitioner’s professional work.
Tax practitioners are regularly de-registered for non-compliance with personal tax. According to Sars rules, a mandatory six-month suspension is applied and de-registered tax practitioners are excluded from registration with any other RCB during this suspension period. De-registered tax practitioners are then liable to demonstrate tax compliance for a cumulative period of six months in the preceding 12 months before Sars will consider lifting the deregistration and authorise the particular tax practitioner to re-enter practice.
To avoid failing the unique application of the fit and proper person test and to prevent deregistration, all tax practitioners must ensure that they remain tax compliant.
- Criminal-free status
A criminal and/or professional disciplinary history bearing features of criminal fraud/misrepresentation and other forms of dishonesty deprive an individual of the right to hold an office of trust. Accordingly, all tax practitioners are required to submit a criminal clearance declaration annually. A sworn affidavit must be submitted every five years, confirming that their criminal-free status and disciplinary records have remained unblemished.
- Continued professional development (CPD)
Members are required to meet certain professional membership obligations to remain registered with Sars as a tax practitioner. Compliance with the minimum prescribed CPD hours requires a member to complete 18 hours of verifiable CPD annually
The hours comprise:
- Ten hours of tax-related learning.
- Six hours of profession-related learning (that is, accounting, finance, law).
- Two hours of ethics.
Failure to complete these minimum prescribed CPD hours may lead to a fine for each year of default, should a member be referred to the disciplinary board.
Other areas of non-compliance
Non-compliance can be established in other instances of consistent breaches of membership terms and conditions or professional rules and regulations:
- Failure to provide updated membership compliance documentation upon request.
- Poor payment habits/history of annual membership fees.
- Failure to abide by the findings of the disciplinary board.
- Failure to respond to and comply with the annual Sars Compliance Audit.
- Failure to adhere to SAIT policies.
Penalties for non-compliance
Meeting the key membership and tax practitioner compliance requirements can ensure that a member avoids one or any combination of the following penalties:
- Temporary suspension of membership and registration.
- Sars deregistration (expulsion for six months).
- Entry into non-compliant list published online and distributed to Sars and relevant RCBs.
- Exclusion from any RCB membership or registration.
- Permanent termination of membership and registration.
Engagement between Sars and RCBs has created a new space for meaningful dialogue. Still, with increased enforcement and deregistration of tax practitioners for non-compliance with membership obligations, various applicable codes and laws, including proper maintenance of personal tax obligations, SAIT members and the collective tax professional community are encouraged to consider their respective compliance as an integral part of their professional careers as opposed to a mere grudge purchase. In essence, the potential adverse repercussions for non-compliance do not outweigh the efforts it may require to maintain healthy compliance.
* Modikwe is the legal and compliance officer at the South African Institute of Taxation
PERSONAL FINANCE
