Can persons other than SARS officials inspect the financial records of the business?
Over the past few years, a number of persons would appear to have been appointed as commission agents under the Unemployment Insurance Act, and persons appointed by the Sector Education Training Authorities (SETAs). The question that arises is whether these persons are entitled to insist upon the right to inspect the financial records of business.
Unemployment Insurance Fund Inspectors
Since the new Unemployment Insurance Contributions Act came into force, it would appear that the Department of Labour has appointed inspectors to check on the Unemployment Insurance Fund (UIF) deductions paid by businesses to the Unemployment Insurance Fund.
Under the provisions of the new Act, the Department of Labour is empowered to appoint persons to check on certain particulars regarding the employees and ensure that they are properly registered for UIF purposes.
The rules regulating the Unemployment Insurance Fund are now contained in the Unemployment Insurance Act, Act 63 of 2001. Section 58(9) of that Act allows a Director-General to:
“(9) (a) appoint agents or designate agency offices to serve as employment offices as may be necessary to assist the Director-General, Commissioner, Board or Fund in properly administering this Act; and
(b) confer on the agents or the officers of such offices such functions as may be necessary to give effect to this objective.”
If agents are appointed, they can only assist a Director-General in respect of the Unemployment Insurance Act.
In so far as the contributions due to the Unemployment Insurance Fund are concerned, those are regulated under the Unemployment Insurance Contributions Act, Act No. 4 of 2002.
This Act is administered by the Commissioner and, in accordance with section 14 there of, a number of administrative provisions of the Income Tax Act apply equally to this Act. Particularly the rules regulating enquiries, search and seizures and obtaining information in respect of the calculation of contributions due and payable under the Unemployment Insurance Contributions Act are governed by the provisions contained in the Income Tax Act. It must be noted, that under section 15 of the Unemployment Insurance Contributions Act, the Commissioner: SARS or Unemployment Insurance Commissioner may request a labour inspector to assist in the investigation of any employer required to contribute in terms of section 8 or 9 of the Unemployment Insurance Contributions Act. Where an employer is registered under the Unemployment Insurance Contributions Act and pays the amounts due to the Commissioner, it could be subject to an inspection by the Commissioner’s officers. If a business is not required to be registered as an employer under the Fourth Schedule of the Act, its contributions will be paid to the Unemployment Insurance Commissioner, who would be entitled to appoint labour inspectors to ensure that the contributions paid over to the Fund are correct.
It would appear that certain SETA appointed inspectors in order to confirm that the skills development levy paid over by employers was correct. The Commissioner: SARS has confirmed that any person purporting to act on behalf of a SETA has no authority to inspect the books and records of an employer in so far as the payment of the skills development levy is concerned. As is the case with other inspectors, only the Commissioner: SARS and his employees have the authority to inspect books and records for the purposes of auditing the skills development levy paid over by employers to SARS and/or the respective SETA.
Thus, any agent purporting to act on behalf of a SETA should be denied access to the business’ books and records, as such request is, in my opinion, unlawful and contrary to the provisions of the Skills Development Levies Act.
Any person holding him/herself out as an officer of the Commissioner: SARS should, upon request, present proper identification validating the person’s authority to act as an officer of the Commissioner: SARS. As pointed out earlier, SARS’ officials are required, under the provisions of the Act to give the taxpayer reasonable prior notice before conducting an audit or inspection of the taxpayer’s books and records.
The next article in this series considers the prospect of a taxpayer successfully postponing the payment of tax pending the finalisation of an objection and/or appeal.
Beric J Croome BCom, BProc, LLB, FCMA, H Dip Tax Law (cum laude), CA(SA) is an Advocate of the High Court of South Africa and a Tax Executive – Edward Nathan Sonnenbergs Inc.