Concern about non-compliant tax practitioners

The South African Revenue Service (Sars) has become aware of a “disturbing trend” where tax practitioners themselves fail to be tax compliant.

Against this background, National Treasury has proposed an amendment to tax legislation to ensure that non-compliant tax practitioners are deregistered.

“If a tax practitioner has not complied on a continuous or repetitive basis and does not correct their behaviour after being notified by the Sars commissioner, they will be deregistered as a tax practitioner,” it noted in the Budget Review.

In an effort to professionalise the industry, tax practitioners have been required to register with a recognised controlling body (RCB) as well as Sars since July 1 2013. In addition, they must have certain minimum qualifications and experience, have no criminal convictions for specific offences and participate in continuous professional development programmes set out by RCBs.

There are currently roughly 23 000 tax practitioners registered with Sars.

Sars spokesperson Sandile Memela said while the regulation of tax practitioners had not cured all levels of non-compliance, there had been an improvement in the submission of returns and general professionalism from tax practitioners.

However, the trend of tax practitioner non-compliance raised the knock-on possibility that some clients were not getting the service they were paying for and were in effect becoming non-compliant taxpayers. Non-compliant taxpayers could face penalties, interest and criminal prosecution.

Memela said Sars had to ensure that taxpayers were not taken advantage of or prejudiced by non-compliant tax practitioners, “or any other tax practitioner for that matter”.

Some of the challenges it is currently experiencing, are the result of taxpayers changing tax practitioners.

“The previous tax practitioner then refuses to release information to the new tax practitioner.”

Faith Ngwenya, technical executive at the South African Institute of Professional Accountants (Saipa), said while there were suggestions that non-compliance was quite widespread, RCBs were not currently in a position to verify this. Sars previously provided information to RCBs about the number of non-compliant members, but this hasn’t been done in recent years.

Keith Engel, CEO of the South African Institute of Tax Professionals (Sait), said non-compliance could take on different forms. Some practitioners might have failed to pay a legitimate tax debt to Sars, while “the occasional guy” might have a criminal record.

Other issues included failure to keep up with educational compliance requirements, disciplinary action for unethical behaviour such as withholding a client’s tax profile because of a contractual dispute or claiming refunds on spurious grounds.

Asked whether they would welcome the deregistration of non-compliant tax practitioners, Ngwenya said it would be important for Sars to first communicate with the RCB as it had its own systems, rather than “going for the jugular” and deregistering practitioners.

Because Saipa requires tax practitioners to supply a tax clearance certificate to be regarded as “in good standing”, and tax practitioners aren’t able to obtain a certificate if their own affairs are not in order, she expects “very few members” to be non-compliant.

Engel said while professional standards are important, it is also imperative that deregistration should be fair. A disagreement with Sars or failure to pay money that was not actually owed should not be grounds for deregistration.

There is also concern about the number of unregistered tax practitioners who service taxpayers as if they were registered.

Engel said some fraudsters would make ridiculous statements on a tax return on behalf of a taxpayer and would claim a percentage of the refund as a fee. However, they would require the taxpayer to sign off the return themselves.

“Then when Sars audits you [the client] two years later, you will find you are in trouble.”

Sars said it was liaising with non-compliant tax practitioners on an individual basis and would follow due process as allowed for in tax legislation to ensure compliance.

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