Authored by: Jean du Toit, Senior Tax Attorney at Tax Consulting SA
SARS Commissioner, Edward Kieswetter, has used the South African Institute of Tax Professionals’ Tax Indaba as a platform to fire a shot across the bow, letting taxpayers know that non-compliance will be met with the full force of the National Prosecuting Authority (NPA).
The Commissioner has allied himself with the NPA and concluded a new accord in terms of which it seeks the prosecution of a long and growing list of at least 1177 non-compliant taxpayers.
Desperate and dangerous
Taxpayers must take this statement very seriously.
It must be understood that, at the moment, SARS is fighting a war on all fronts – on the account of the Commissioner himself, it is facing an internal battle to clean up the devastation left by the previous tenures, whilst, at the same time, trying to make good on a massive budget deficit and hoping to eradicate a widespread slippage in taxpayer morality.
Times are desperate and SARS has no choice but to proceed on a no-tolerance basis.
Enforcement is key
At the height of its potency, when SARS was one of the most revered revenue authorities across the globe, it operated on three legs, a model developed in SARS’ early years of existence by the then Commissioner for SARS, Pravin Gordhan.
One of these indispensable legs was enforcement, which, seemingly, Mr Kieswetter is intent on reviving.
The Commissioner’s approach is encouraging, as we agree that a compliant tax base is very much key in SARS’ renaissance and the fear of criminal prosecution is certainly an effective mechanism in getting compliance back to where it should be.
SARS’ war chest
For those who may still want to take their chances, it is perhaps important to be alive to the fact that the infrastructure and machinery to effectively prosecute taxpayers are already in place, albeit, in recent times, we have not seen it being used as often as it should be.
However, when SARS chooses to wield its arsenal, it can be devastating.
Those who believe that criminal prosecution is reserved for taxpayers who are involved with high-end tax evasion or the elicit tobacco trade should revisit their convictions.
The Tax Administration Act No. 28 of 2011 (TAA) criminalises a wide array of acts of non-compliance, ranging from seemingly “petty” transgressions such as the failure to file a return or to retain documents, to more serious acts of tax evasion.
Taxpayers must also be cognisant that where they are to any degree implicit in the non-compliance of another taxpayer, they may also face criminal prosecution.
This includes failure to withhold PAYE or instances where a person is involved in a company’s non-compliance.
The TAA does not spare negligent or lax taxpayer’s either, as intent is not always a requirement to fall foul of the criminal offences list.
For example, a person may have started a company and simply never bothered with its compliance, in which case he or she may be prosecuted under the TAA, as well as the Companies Act No. 71 of 2008. A taxpayer’s ignorance can easily result in the NPA, at the behest of SARS, knocking at their door.
Do not tempt fate – it is not too late
The good news is that SARS encourages taxpayers to confess their sins and the TAA makes express provision for such instances in the form of the Voluntary Disclosure Programme (VDP).
The VDP gives amnesty from criminal prosecution, in addition to substantial relief from penalties.
Taxpayers would do well to heed the Commissioner’s warning shot; do not be the one in the orange uniform who galvanises compliance in others.
The key here is “first mover advantage”, as you are legally prohibited from claiming VDP where a tax audit has commenced.
What we would not like to see
The last time SARS started an initiative similar to this, it pursued the softest of targets, such as a celebrity soap star who did not submit a tax return and a small trader in Port Shepstone who failed to submit his VAT returns.
A couple of admission of guilt fines later, and SARS claimed bragging rights.
Whilst everyone should be treated as equal before the law, this probably did not have tax fraudsters quaking in their boots; likely quite the opposite.
Prosecuting with courage
If SARS wants the tax base to know that it means business this time, it should consider the following
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