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Following criticism of tax advisors by Finance Minister Pravin Gordhan in his 2012 Budget Statement in February this year, the South African National Treasury has proposed that, in a first phase, they should be made to register with a ‘recognized controlling body’.
Gordhan had confirmed that the attitude of tax practitioners and other intermediaries to their own tax compliance, and their role in the tax system, would come under increased scrutiny.
In his statement, he disclosed that an “analysis of compliance among the country’s 34,000 tax advisors shows practitioners owe over ZAR260m (USD31.7m) in outstanding taxes, and have more than 18,000 income tax returns outstanding in their personal capacity. If that is their attitude to their own tax compliance, one shudders to think what advice they are giving to their clients!”
The South African National Treasury has now released, for public comment prior to their formal introduction in parliament, the draft 2012 Taxation Administration Amendment Bill which proposes that the regulation of tax practitioners be divided into two phases.
The first phase will be the compulsory registration of tax practitioners with a recognized controlling body, while the second phase will be the establishment of an independent regulatory board for tax practitioners. The second phase will begin with a review of the first phase eighteen months after its implementation.
The proposed recognized controlling body, which will leverage existing bodies, is seen as midway between the current lack of regulation and a statutory regulator. It is intended to provide a framework to ensure that tax practitioners are appropriately qualified and that a mechanism is available, both to taxpayers and the South African Revenue Service (SARS), to ensure that misconduct is addressed, Gordhan said.
The legislative proposal hinges on two requirements: the existing requirement that tax practitioners register with SARS, which was brought into force in 2005, and which provides that a tax practitioner may not be registered if he or she has been removed from a professional body or convicted for a crime involving dishonesty in the preceding five years; and a new requirement for all tax practitioners to belong to a recognized tax practitioners’ association or fall under the authority of a directly relevant statutory regulator, such as the Independent Regulatory Board for Auditors.
SARS would review the minimum qualifications and experience requirements, continuing professional education requirements, codes of ethics and conduct and disciplinary procedures of a professional association seeking recognition. It would, for example, ensure that members are required to have knowledge of tax that is kept up to date, and that an effective disciplinary mechanism exists to deal with members who contravene the codes of ethics and conduct.
To ensure sustainability and credibility, associations should have a minimum of 1,000 members upon either application or within a year to cater for new associations, while the range of misconduct that may be reported by SARS to a professional association or statutory regulator is to be expanded to cover additional tax specific misconduct.
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