By Schalk Pieterse (Director) & Chris Stroud (Candidate Attorney). Attorneys Pieterse TRM Erasmus
SARS has very wide powers to collect information and conduct tax audits, randomly.
But what does randomly mean in the context of the Tax Administration Act, 2011 read together with the Constitution?
In a fairly recent Canadian Federal Court case, Cameco Corporation v Canada (National Revenue). Justice Noël found that section 231.1(1) of the ITA should be used with restraint. The Minister in conducting audits must be provided “all reasonable assistance” but this did not mean taxpayers must be compelled to reveal their “soft spots” (uncertain tax positions making up their tax reserves) in preparing tax returns, on a self-disclosure basis. The Minister is not vested with unlimited powers. Section 231.1(1) of the Canadian ITA reads as follows:
Inspections 231.1 (1)
An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act,
- (a) inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by the taxpayer under this Act, and
- (b) examine property in an inventory of a taxpayer and any property or process of, or matter relating to, the taxpayer or any other person, an examination of which may assist the authorized person in determining the accuracy of the inventory of the taxpayer or in ascertaining the information that is or should be in the books or records of the taxpayer or any amount payable by the taxpayer under this Act, and for those purposes the authorized person may
- (c) subject to subsection 231.1(2), enter into any premises or place where any business is carried on, any property is kept, anything is done in connection with any business or any books or records are or should be kept, and
- (d) require the owner or manager of the property or business and any other person on the premises or place to give the authorized person all reasonable assistance and to answer all proper questions relating to the administration or enforcement of this Act and, for that purpose, require the owner or manager to attend at the premises or place with the authorized person.
Download paper by Schalk Pieterse: RANDOM AUDIT SELECTION
Additional Update to this article
Please read this article: Cameco decision a blow to CRA?s transf er pricing audits _ Grant Thornton
In South Africa we unfortunately have this negative judgment, which is subject to being overturned with a better set of facts, and a focus on the above Canadian Authorities: