Abstract
This article shows that, whereas a bilateral legal relationship exists between the South African Revenue Service (SARS) and a vendor in relation to value-added tax (VAT), a tri-partite legal relationship exists among the SARS, employees and employers in relation to Pay As You Earn (PAYE). This article shows further that employers are, as withholding agents of PAYE, in the same legal position as vendors as regards VAT, namely, they are not in a trust or agency relationship with the SARS. Rather, this article argues that PAYE is in the nature of trust funds held by employers on behalf of employees from whose remuneration it is deducted. Since the employees retain ownership of the PAYE deducted, this article argues that employees have locus standi to lay a charge of theft against employers who misappropriate PAYE. Such a charge of theft is not grounded in tax administration. This article shows further that, as the law presently stands, a charge of theft falls outside the ambit of the remedies available to the SARS against employers and vendors who default in remitting PAYE or VAT. The Tax Administration Act, 2011 read with the Income Tax Act, 1962 and Value-Added Tax Act, 1991 codified only a limited range of criminal sanctions and administrative penalties that may be imposed against a defaulting employer or vendor. If theft is to be included, then a legislative amendment is required.
Highlights
The Covid-19 pandemic is, arguably, the most formidable challenge that South Africa has faced in a century.1 With the aim of slowing the transmission of the novel Coronavirus, the South African government introduced measures to lock down the country.2 This involved inter alia the cessation of trading under risk assessment level five, except for businesses providing essential services or goods
This article shows that, whereas a bilateral legal relationship exists between the South African Revenue Service (SARS) and a vendor in relation to value-added tax (VAT), a tri-partite legal relationship exists among the SARS, employees and employers in relation to Pay As You Earn (PAYE)
This article shows that, whereas a bilateral legal relationship exists between the SARS and a vendor in relation to VAT, a tri-partite legal relationship exists among the SARS, employees and employers in relation to PAYE
Summary
The Covid-19 pandemic is, arguably, the most formidable challenge that South Africa has faced in a century. With the aim of slowing the transmission of the novel Coronavirus, the South African government introduced measures to lock down the country. This involved inter alia the cessation of trading under risk assessment level five, except for businesses providing essential services or goods. With the aim of slowing the transmission of the novel Coronavirus, the South African government introduced measures to lock down the country.2 This involved inter alia the cessation of trading under risk assessment level five, except for businesses providing essential services or goods. On 23 March, 2020 President Cyril Ramaphosa announced ways in which the tax system would be utilised to cushion the financial blow.5 He announced that businesses generating an annual turnover of less than fifty million rand would be permitted, first, to defer the payment of twenty per cent of their monthly employees' tax liabilities for a period of four months without incurring interest and penalties under the Tax Administration Act. Apart from the turnover requirement, qualification for these benefits was restricted to tax compliant businesses.8 Consistent with this governmental policy, the South African Revenue Service (SARS) introduced value-added tax (VAT) relief on imported goods. "essential goods" include food, cleaning and hygiene products, medical and hospital supplies, and fuel. To qualify for exemption under this item, the requirements were: firstly, at the time when imported goods are cleared for consumption, an importer must possess a certificate issued by the International Trade Administration Commission; secondly, goods imported under this item may not be disposed to persons who do not enjoy the privileges under this item
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