On 31 January 2022, SARS hosted a public workshop to discuss the draft Voluntary Disclosure Programme Guide and uncertainties about the Voluntary Disclosure Programme process.
As part of its ongoing efforts to reform its Voluntary Disclosure Programme (VDP), the South African Revenue Service (SARS) hosted another workshop with interested stakeholders, primarily to discuss comments on its draft VDP Guide.
The draft VDP Guide explains SARS' understanding of the VDP process and provides general guidance to taxpayers wishing to make use of the VDP to voluntarily disclose and regularise tax defaults.
Two of the main agenda items discussed at the workshop were:
- the impact of prescription on the VDP process; and
- the meaning of "audit" and "voluntary" for purposes of the VDP.
Regarding the impact of prescription, and the associated document retention timeframes, as set out in the Tax Administration Act, 2011 (TAA), SARS was firm that taxpayers wishing to regularise a tax default must do so for the entire period of the default, not just three or five years. Some stakeholders argued that, when information was not available, any estimated assessments that SARS issued ought to be pragmatic and based on the facts of the matter at hand.
In relation to the meaning of "voluntary", the draft VDP Guide refers to the ordinary meaning of the term as "done, made, or given willingly, without being forced or paid to do it". The draft VDP Guide contextualises this meaning with reference to two recent cases: Purveyors South Africa Mine Services (Pty) Ltd v CSARS 83 SATC 176 and Reed v Minister of Finance and Others 2017 ZAGPPHC 987. Both decisions support the concept that VDP applications must be done freely and without any prompting from SARS.
Shortly after the draft Guide was published, the Supreme Court of Appeal (SCA) delivered a judgment in Purveyors South Africa Mine Service (Pty) Ltd v CSARS 2021 ZASCA 170 (Purveyors case). In the Purveyors case, the SCA considered the meaning of "voluntary", "disclosure" and "voluntary disclosure". "Voluntary" and "disclosure" were defined as "performed or done of one's own free will, impulse or choice; not constrained, prompted or suggested by another" and "to open up to the knowledge of others, to reveal" respectively. "Voluntary disclosure", so it was held, occurs when taxpayers, unprompted and of their own volition, come forward to disclose a tax default to SARS.
We believe that, in the final VDP Guide, SARS could give taxpayers more certainty by supplying guidelines on how it will calculate reasonable estimates when not all supporting information is available. It could also endorse the meaning of "voluntary", "disclosure" and "voluntary disclosure" for purposes of the VDP and as set out in the Purveyors case.
SARS' determination to reinvigorate the VDP process and issue a final VDP Guide is to be welcomed. Ultimately, when there is certainty about the VDP process, more taxpayers will come forward voluntarily and disclose their tax defaults to SARS.