Assisting Foreign Governments with Tax Collection
19 February 2014
Graeme Palmer, Garlicke & Bousfield
Graeme Palmer, a Director in the Commercial Department of Garlicke & Bousfield Inc.
As governments around the world come under pressure to collect tax to meet their growing needs and budget deficits there has been an increase in cross-border co-operation between tax authorities. This can be seen in the treaties concluded between countries to limit tax avoidance transactions, the sharing of information by tax authorities with other countries, and assistance offered to foreign governments in tax collection and enforcement.
The recent judgment in the North Gauteng High Court of SARS v Mark Krok illustrates how SARS can provide assistance to foreign tax authorities for the collection of taxes. SARS, acting on a request for assistance from the Australian Tax Office ("ATO”), sought a court order appointing a curator bonis to preserve and protect the dissipation of Krok’s South African assets. Krok, who owed the ATO R235 million in taxes, had a large share portfolio, bank accounts and properties in South Africa.
Section 163 of the Tax Administration Act, 2011 ("TAA”) allows SARS to apply for a court order preserving a taxpayer’s assets, and if necessary, the appointment of a curator bonis to secure the payment of taxes. If SARS receives a request in accordance with an international tax agreement for the conservancy of an amount due under the tax laws of a foreign government, section 185 of the TAA enables SARS to apply for a preservation order under section 163.
Before SARS can come to the assistance of a foreign government there must be a risk of dissipation or concealment of assets by the person. The foreign tax authority must provide a formal certificate confirming this fact, together with other information such as the amount of tax due, and whether the liability for the tax is being disputed under the other country’s laws. If the liability for tax is disputed then the certificate must state whether such dispute has been entered to delay or frustrate the collection process. The certificate is deemed to be conclusive proof of the tax liability and prima facie proof of the other statements contained therein.
After considering all the objective facts, the court was satisfied that a preservation order should be granted against Krok. Krok’s case demonstrates how mutual assistance and co-operation amongst revenue authorities can be effective in securing the collection of tax. The ATO’s success in this case will undoubtedly encourage other tax authorities to seek SARS assistance.
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