Sars declares war on tax dodgers
SA Revenue Service (Sars) commissioner Edward Kieswetter used the SA Institute of Tax Professionals’ tax indaba as a platform to fire a shot across the bows of taxpayers, letting them know that non-compliance will be met with the full force of the National Prosecuting Authority (NPA).
Sars has concluded an accord with the NPA in terms of which it seeks to prosecute at least 1177 non-compliant taxpayers.
Sars is fighting a war on two fronts. The commissioner is facing an internal battle to clean up the devastation left by the previous tenures, while trying to make good on a massive budget deficit and hoping to eradicate a widespread slippage in taxpayer morality.
At the height of its potency, when Sars was one of the most revered revenue authorities in the world, it operated on three legs, a model developed in the early years of Sars’s existence by then commissioner Pravin Gordhan. One of those indispensable legs was enforcement which, seemingly, Kieswetter is intent on reviving.
A compliant tax base is key to Sars’s renaissance, and the fear of criminal prosecution is an effective mechanism in getting compliance back to where it should be.
For those who may still want to take their chances, it is important to be alive to the fact that the infrastructure and machinery to effectively prosecute taxpayers are in place - although, 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 involved with high-end tax evasion or the elicit tobacco trade should revisit their convictions.
The Tax Administration Act (TAA) criminalises an array of acts of non-compliance, ranging from seemingly “petty” transgressions, such as the failure to file a return and retain documents, to more serious 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 taxpayers 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. A taxpayer’s ignorance can easily result in the NPA, at the behest of Sars, knocking at their door.
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 is “first mover advantage”, as you are legally prohibited from claiming VDP once a tax audit has started.
* Jean du Toit is a senior tax attorney at Tax Consulting SA.