Tax Practitioners: The Critical Importance of Compliance and Professional Standards

The relationship between the South African Revenue Service (SARS) and the recognised controlling bodies (RCBs) plays a vital role in regulating the tax profession. The primary goal is to ensure uniform standardisation and enforcement of professional rules and standards, enhancing professionalism within the field of taxation. In recent years, there has been more robust engagement between relevant RCBs and SARS, aiming to strengthen compliance measures within the tax profession. In this article, we will delve into the significance of compliance for tax practitioners and explore the potential repercussions of non-compliance.

Mandatory Registration with RCBs and SARS

Section 240 of the Tax Administration Act (TAA) mandates all tax professionals in practice to register with an RCB and SARS. Without this registration, an individual has no legal or regulatory authority to act as a tax practitioner or offer tax services for a fee. Non-compliance with this provision can result in criminal prosecution against the offending individual. Furthermore, failure to maintain compliance with RCB standards, including tax practitioner compliance requirements, may lead to disciplinary actions, including revocation of professional membership and registration with SARS.

Consequences of Operating Without Registration

Operating as a tax practitioner without the necessary registration constitutes a criminal offence. If convicted, the tax practitioner may be liable for substantial financial penalties and/or imprisonment. This highlights the critical importance of adhering to the registration requirements and conducting tax-related activities within the bounds of the law.

The Utility of RCB Membership

RCB membership offers numerous benefits for tax professionals. Besides regulation and professional recognition, tax practitioners gain access to services such as compliance and technical support. For instance, members of the bodies through which one can become a tax practitioner as a group receive valuable support, including proper representation, relevant education, and unprecedented access to SARS through direct escalation networks.

Compliance with Professional and Ethical Standards

In the realm of professional regulation, membership allows tax practitioners to understand their roles and obligations within the larger professional community. These bodies, for instance, maintain professional and compliance standards by setting membership eligibility and retention criteria, along with tailor-made codes of conduct that incorporate SARS regulations and relevant statutory requirements. Additionally, members receive useful guidelines on diverse ethical standards to apply when facing professional or ethical dilemmas.

Prominent Areas of Non-Compliance

  1. Disciplinary Records – General

Disciplinary history is crucial to note, as members who fail to abide by RCB codes and SARS standards may be found negligent or guilty of unprofessional conduct. This could result from issues such as failure to file tax returns promptly and accurately. Sanctions for non-compliance vary depending on the merits of each case and may include formal reprimands, financial fines, membership suspension, or termination.

  1. Contingency Fees

Raising contingency fees against taxpayer refunds may create a “perverse incentive,” leading to a conflict of interest that affects a practitioner’s integrity and objectivity. This could potentially obstruct the administration and collection of tax revenue.

Compliance with Regulatory Requirements

The bodies through which one can become a tax practitioner, as a group, diligently evaluate and monitor member compliance with industry-specific regulations and statutory requirements enforced by SARS. The main focus areas for regulatory compliance are:

  1. Individual/Personal Tax Compliance

SARS has the power to deregister tax practitioners under the TAA due to non-compliance with tax or existing criminal records and convictions involving dishonesty and/or fraud. Tax practitioners must ensure their personal tax affairs are always in good standing to avoid deregistration.

  1. Criminal-Free Status

Tax practitioners are required to submit a criminal clearance declaration annually, confirming their criminal-free status and unblemished disciplinary records.

  1. Continued Professional Development (CPD)

To remain registered with SARS as a tax practitioner, members must comply with prescribed CPD requirements, including tax-related learning, profession-related learning, and ethics.

Other Areas of Non-Compliance

Non-compliance can also be established in instances of consistent breaches of membership terms and conditions, failure to provide updated membership compliance documentation, poor payment habits, non-adherence to governing policies, and failure to respond to and comply with the annual SARS Compliance Audit.

Penalties for Non-Compliance

Non-compliance with tax practitioner compliance requirements can result in the temporary suspension of membership and registration, SARS deregistration (expulsion for six months), entry into a non-compliant list published online and distributed to SARS and relevant RCBs, exclusion from any RCB membership or registration, and permanent termination of membership and registration.

Engagement between SARS and RCBs has created a new space for meaningful dialogue. As enforcement and deregistration of tax practitioners increase, it is crucial for the collective tax professional community to prioritise compliance as an integral part of their professional careers. By maintaining healthy compliance, tax practitioners can ensure ethical conduct and enhance professionalism within the field of taxation. Remember, the potential adverse repercussions of non-compliance do not outweigh the efforts required to maintain regulatory compliance. Stay compliant, stay professional!