Abstracts Category : Other

Attributing atax liability of a delinquent company to a representative taxpayerof the company

by Johan Cornelius Els

The South African Revenue Service has for many yearsfound it difficult to collect sufficient amount of tax from alimited taxpayer base. It has therefore sought to increase therange of its collections efforts by including in legislationseveral aggressive collections actions such as attributing a taxliability of a company to its representative taxpayer. It appearsfrom reading the enabling provisions of the Act that thelegislature omitted to determine the exact manner in which such taxdebt should be attributed. This is precariously done by issuing therepresentative taxpayer with a notice informing him/ her of his/her suspected liability and thereafter blindly attributing the taxdebt without notice of assessment. If compared to the South AfricanCompanies Act, Act 73 of 2008 it becomes apparent that in instanceswhere a director has been found to have violated his fiduciaryduties and contributed or caused a debt to be unpaid he would onlybecome liable through the operation of law. Simply an aggrievedparty must upon application to the relevant court prove grossnegligence, fraud or an unconscionable abuse by the directorconcerned before the court will deem such person to be liable. Thecourts have the benefit of decided cases to assist them in makingan objective determination whether a person becomes liable or not.Contrary to the South African Revenue Service's its Australiancounterpart has through their legislators found it wise to, insimilar circumstances, impose a penalty to a suspecting defaultingdirector. The director would be given a determined amount of timeto remedy the default after which, if left unpaid, a penalty equalto the liability would be imposed upon the director. The AustralianTax Authority has also sought to include various defences asuspecting defaulting director may rely on to refute any claim ofliability. This approach is seen to be pragmatic and pro-active asit allows the Australian Tax Authority to mitigate any real loss itmay incur. In my dissertation, I will evaluate and compare thedifferent approaches of attributing a liability of the delinquentcompany to its representative in differing fields of law andjurisdictions. In the comparison, it will be shown that the mannerin which a tax debt is attributed to a representative taxpayer isjust as important for the reason a revenue authority would want toattribute a tax debt to a representative taxpayer. The purpose ofthe comparison is to highlight the effectiveness of the differentapproaches and the burden of proof that needs to be overcome by acomplaining party. In the dissertation, it will become evidentthat, despite moral and judicial justification for attributing atax debt of a delinquent company to its representative taxpayer,there are debilitating shortcomings in the South African RevenueService's current approach.Advisors/Committee Members: Kujinga, Benjamin T. (advisor).