To explain the process whereby tax policy is developed into law in South Africa, Mark Preiss of Baker McKenzie's Tax Practice in Johannesburg, spoke at a recent tax law event at the firm’s Johannesburg office regarding his experiences while working at the National Treasury in South Africa.
Preiss explained that South African tax policy is developed in the pre-Budget phase and then announced in the Budget Review during February each year.
"Numerous government departments, the tax-paying public, and various advisors, submit policy proposals to Treasury, which then get collated and analysed, and a decision is then made whether the submissions should be announced in the Budget Review. Members of the Finance Ministry, as well as SARS, and other government departments, review the proposals. It’s a collaborative process," he explained.
"Once the Budget Speech has been delivered, the legislation is drafted. To get legislation to a state where you see it in the public domain involves numerous rounds of internal review and collaboration within Treasury and SARS."
"The draft legislation is then released into the public domain, and the public is invited to submit comments to Treasury, SARS, and Parliament. Public hearings are scheduled by Parliament, during which the public is invited to present their comments to Parliament's Finance Committee. Following this process of public consultation, there would often be significant amendments to the draft legislation."
"Once the public consultations are finalised, the State Legal Advisors review the draft legislation in order to determine whether it is technically ready for submission to Parliament. The legislation then goes through a formal process in Parliament and eventually passed into law. During this formal process, Parliament schedules further hearings during which the public can comment on the legislation."
"The opportunity therefore exists for the public to suggest tax policy proposals and to review and comment on the draft legislation before it is finally passed into law," he explained.
Stephan Spamer, Head of Tax at Baker McKenzie in Johannesburg noted further that, "In terms of tax law compliance, we understand that clients require legal advisors who can mitigate their tax risks in a cost-effective way. Businesses are now looking for bespoke advice which provides workable solutions to their tax queries and protects them against penalties. They also want their tax advisors to know the potential outcomes of any disputes with SARS, what it will cost and how these can be addressed. There is no longer an "open chequebook" approach to tax advice."
Spamer noted, however, that while businesses’ demands in terms of tax advice were changing, contrary to recent opinions, SARS had not. "With regards to recent comments that SARS is not properly prepared or skilled to perform its functions effectively, if you think that, you are making a big mistake. Our experience has been that SARS is fully geared to assess and collect taxes, and taxpayers must be compliant and prepared," he added.