Cross border tax assistance as a framework for revenue mechanism

Abstract

A national tax authority i.e., SARS has a wide range of powers at its disposal to collect taxes that are not paid or on time or in their full amount within the borders of South Africa. The issue arises when a taxpayer leaves their jurisdiction without settling the tax debt or has no asset within the jurisdiction that may serve to recover the tax debt. Tax authorities across the globe have thus come up with measures to ensure effective collection of taxes in response to the possibility that taxpayers may avoid paying their tax debts. The initial step is therefore to request for assistance from a foreign tax authority to collect the taxes due. The process of cross-border tax assistance is a significant and necessary one in ensuring the recovery of tax debts from a foreign government. As means of addressing the threat, South Africa introduced section 93 of the Income Tax Act which was later repealed by section 185 of the Tax Administration Act in the assistance of recovering of tax debts from a foreign government. This provision is however subject to the fact that there ought to be an international tax agreement concluded between South Africa and the foreign government. Recent cases show cooperation and assistance between SARS and foreign tax authorities in the enforcement of outstanding taxes and indicates an increase in international effort s to prevent efforts of taxpayers avoiding paying their taxes.