South Africa's unsuspecting accountants could fall foul of the taxman if they don't get up to speed with new legislation.
Nicolaas van Wyk, CEO of the Southern African Institute for Business Accountants (SAIBA), this week warned accountants that the recently introduced Tax Administration Act (TAA) had far-reaching implications for them, including criminal sanction if they didn't pay due attention to the part they play in the affairs of their taxpayer clients.
"Simply put, the act makes accountants very vulnerable if they don’t take immediate steps to ensure they review their engagement and relationship with their clients," said van Wyk.
Stiaan Klue, CEO of the South African Institute for Tax Practitioners (SAIT) said that “thus far only the tax accountant has received accountability sanctions for their advice to the public as a registered tax practitioner”.
The new legislation requires that any person providing advice on the application of a tax act, or who completes or assists with completing a tax return, should register with SARS and a controlling body - failure to register is a criminal offence.
According to van Wyk, “The Tax Administration Act does more than just regulate the conduct of tax practitioners. A careful reading of the TAA will reveal that SARS is empowered to monitor and control the complete financial reporting supply chain. Criminal liability is allocated to a wide range of areas, and is not limited to only the information reflected on a tax return and submitted by a tax practitioner”.
The bookkeeper, accountant, accounting officer, independent reviewer and auditor are all involved in the financial reporting supply chain of any business.
"If they are found to assist a business to unduly avoid, postpone or evade taxes, they may be held criminally liable. It is therefore not only tax practitioners who are affected by the Tax Administration Act. The fact is that generally, tax practitioners rely on the work performed by the bookkeeper, accountant, and auditor to determine a business’s tax liability."
Klue explained, by way of example, that a senior SARS official is empowered to lay a complaint against a tax practitioner with the tax practitioner's professional body. However, this power is extended to include the conduct of the accountant who merely assists the business in preparing financial statements. A complaint can be laid against the accountant if he intentionally or by way of negligence assists a business to avoid paying tax or unduly postpones the payment of a tax. Late filing of financial statements or applying an incorrect accounting method may see the accountant fall foul of this requirement.
According to van Wyk, SARS can also demand a new “statement of account” from the accountant who prepared the financial statements for a business or taxpayer. In this statement the accountant will have to explain how the financial statements were prepared and whether the financial statements disclose the true nature of any transaction, receipt, accrual, payment or debit. "If a false or misleading statement is made, the accountant and not the tax practitioner, will be criminally liable.”
Van Wyk therefore cautions that accountants must apply the correct accounting framework when preparing financial statements for clients and that the reports that they issue on the financial statements are prepared within acceptable standards. Failure to comply will result in criminal sanctions.
He warned that accountants can no longer use a “don’t ask, don’t tell” approach when preparing financial statements. If they know or have reason to believe that the financial information presented to them by their clients is prepared recklessly, incorrectly, incompletely, inconsistently or prepared without the required diligence, they have a statutory duty to rectify the non-compliance or resign as the client’s accountant.
Van Wyk advises that all accountants should therefore ensure that they
- inform their clients of the accountants’ new Tax Administration Act imposed duties,
- implement engagement procedures to mitigate the potential risks, and
- update their knowledge of accounting standards.
“The TAA has changed the relationship between the accountant and his client. In order to protect themselves accountants will be forced to remove any emotional attachment to their clients and adopt a much more formalistic and legalistic approach,” says van Wyk.
