The criminalisation of tax non-compliance
By David Werneke
JOHANNESBURG - The Draft Taxation Amendment Bills of 2020 contain proposals whereby non-compliance with the requirements of various tax Acts without wilful intent will become criminal offences, with the result that, among other negative consequences, the offender may obtain a criminal record.
The types of non-compliance that would be criminalised include some of a serious nature but also include, for example:
- Failure to notify SA Revenue Service (SARS) of a change in address
- Failure to notify SARS of a change in representative taxpayer and
- Making an error on a tax return.
- The proposals have been met with justifiable concern by many commentators, including BDO and South African Institute of Chartered Accountants. Currently, the law requires that a person must “wilfully and without just cause” be non-compliant before criminal sanction can result. Essentially the amendments would have the effect of deleting the words “wilfully and” in the above phrase, so that the phrase would read that a person must (simply) “without just cause” have been non-compliant.
Apparently, the proposed amendment has arisen as a result of the NPA not being able to secure convictions for tax offences.
The standard required before a person can be found guilty of a criminal offence is, in my view, justifiably high and should require the presence of wilful intent on the part of the perpetrator that should have to be proved by the State before the perpetrator may be found guilty.
Section 12 of South Africa’s Constitution guarantees everyone the right to freedom and security of the person, which includes the right not to be deprived of freedom arbitrarily or without just cause. In Minister of Justice and Constitutional Development v Masingili, the Constitutional Court found that “for criminal liability the common law generally requires proof of – in addition to an unlawful criminal act or actus reus – fault, culpability, or mens rea, usually in the form of dolus (intent) on the part of an accused.”
It should not be possible for a person without wilful intent to obtain a criminal record for, for example, forgetting to notify SARS of a change of address or making an innocent mistake on a tax return. Furthermore, in S v Dodo, the Constitutional Court found that “the legislature ought not to oblige the judiciary to impose a punishment which is wholly lacking in proportionality to the crime”.
The imposition of criminal sanction for a tax offence should require wilful intent on the part of the perpetrator, as is currently the case. The level of criminal sanction also has to be proportional to the severity of the crime.
I understand that National Treasury has since backed down somewhat from the position taken in the Draft Bills in that it is likely to propose a categorisation of offences into those for which intent or negligence is required and those for which intent is required. However, concerns around the constitutionality of such amendments remain.
Negligence may be implied by the fact that the tax Act in question had imposed a duty upon the person that had not been complied with. So, for example, absent extraordinary circumstances, the fact that a person had failed to notify SARS of a change in address could imply negligence on the part of the person that could, if the revised proposal is implemented, lead to criminal sanction.
Professor David Werneke is the head of tax technical At BDO South Africa.