Registration as a taxpayer and the employer’s responsibilities

The legislation should be the starting point of all things tax-related. Taxpayers are quick to respond to communications from the South African Revenue Service (“SARS”) without asking the question: In the terms of what section of the Income Tax Act am I obliged to provide the information?

Let’s take for instance the request from SARS for employers to register employees as taxpayers. Is this a valid request and if yes, in terms of what section of the Act, is the employer obliged to do so?

Section 67 of the Income Tax Act states that every person who becomes liable for normal tax or who becomes liable to submit a tax return must apply to the Commissioner to register as a taxpayer. Section 67 also states that any person whose income is derived solely from net remuneration and is only subject to SITE withholding, is not required to register as a taxpayer.

Section 69 of the Income Tax Act examines the duty to furnish information or returns. This section is relevant to employers as it governs the monthly and annual returns that are submitted. Section 69 stipulates (amongst others) that every person shall, if required by the Commissioner, furnish the Commissioner with the full names, address and income tax reference number, “if that number is available”.

Critical in this instance, is the reference to the word “available”. Where the information is available, it should be provided to SARS. Where the information is unavailable, it cannot be provided to SARS. Accordingly, where an employee is not registered as a taxpayer, the tax reference number cannot be furnished to the Commissioner as it is unavailable. In addition, where the employer has made numerous unsuccessful requests to an employee to provide his/her tax reference number, this information would be unavailable.

SARS, in its requests to employers may potentially be relying on Section 69 (3) of the Income Tax Act. Loosely worded, Section 69(3) states that every person to whom a return or a written request for information is sent by the Commissioner, must complete the return or comply with the written request for information in accordance with the requirements of the Commissioner and return it to the commissioner.

In the case of S v Ziegler, which specifically dealt with the powers available to SARS in terms of Section 69(3), the court indicated that information which an addressee does not possess cannot be insisted on. In addition, it was stated that where a person is confronted with a request for information which he does not have, he can answer “unknown” or “not applicable”. More importantly, it was stated that “There is no reason to suppose that Parliament in enacting section 69(3),…had any other manner of coercion in mind. Information is demanded whenever necessary and whenever applicable. Taxpayers, who cannot, without any fault of their own, furnish information required…do not commit an offence. Nor do they commit an offence if they answer a peremptory question by saying “not applicable” if such be the case.”

In conclusion, there does not appear to be anything compelling an employer to register an employee as a taxpayer. It is clear that the annual declaration requires the employer to input the employees’ tax reference number. However, in terms of the legislation and case law, the employer should fill in this information where it is “available”. It does not connote an obligation by the employer to register the employee as a taxpayer in order to be able to fill the blank space in the annual declaration. In fact, as section 67 indicates that the individual must register as a taxpayer, it may be possible to argue that where an employer registers an employee (without the specific consent of the employee to act on his/her behalf), the employee can take legal action against the employer.