Indications are that the South African Revenue Services is no longer allowing tax fraud to run rampant in South Africa, and is ramping up its action against perpetrators who operate on the fringes of the law.
According to Tax Consulting SA, “the chickens are coming home to roost” for violators after SARS came knocking on the door of a private hospital and its director this week, charging them both with tax fraud.
“Long gone are the days when tax fraudsters could run circles around SARS. Recently, it has intensified its efforts to crack down on tax evasion by pursuing criminal action against non-compliant taxpayers,” the tax experts said.
The private healthcare facility in question was recently charged with alleged PAYE, VAT, and income tax fraud in excess of R500 million, while the director was similarly charged with alleged tax fraud to the tune of R750 million. Upon conviction, the parties involved could potentially face a prison sentence of up to 40 years, Tax Consulting said.
“This is clear that SARS is no longer allowing tax fraud to run rampant without any remedial action on their part. The Commissioner of SARS has often stated that voluntary compliance should be made easy, while non-compliance should be a difficult and costly experience.”
The consultancy group said that taxpayers should take the opportunity presented by the revenue service’s Voluntary Disclosure Programme to come clean on any holes in their tax affairs.
“The Tax Administration Act, No. 28 of 2011, provides a saving grace to taxpayers who come clean to SARS. A VDP application to SARS is the only way to avoid prison time,” it said.
Through the VDP, SARS agrees to grant amnesty from criminal prosecution and to waive all understatement penalties where the taxpayer approaches SARS with an application before notification of audit or criminal investigation.
The exception to this is in instances of gross negligence and intentional tax evasion, where the penalties are charged at 5% and 10%, respectively.
A taxpayer’s VDP application must comply with certain requirements:
- The disclosure must be submitted before the taxpayer is notified of an audit or criminal investigation by SARS;
- The disclosure must be made voluntarily;
- A disclosure must not have been made for a similar ‘default’ in the preceding five years;
- The disclosure must be fully described and complete in all materials aspects;
- The disclosure must not trigger a refund due by SARS; and
- The disclosure must be made in the prescribed form and manner.
“Thereafter, should the VDP application be accepted by SARS, then a VDP agreement is concluded between the taxpayer and the Commissioner of SARS. Therein, the material facts of the matter are outlined, and a payment plan for any amounts due to SARS is agreed on,” Tax Consulting said.
“In turn, SARS agrees to waive any criminal prosecution and remit any understatement penalties. However, interest is always payable.”
The warning comes as SARS heightens its capacity and capabilities when it comes to clamping down on tax evasion and other measures used to subvert or avoid paying dues in the country.
On top of strengthening its workforce, building relationships with foreign jurisdictions and implementing new technologies that leverage automation and big data to chase down taxpayers, the taxman is also taking matters to court – and winning.
A recent case involving billionaire Christo Wiese showed that not even the super-wealthy and their businesses can escape paying their tax obligations.
The message is clear: SARS is not messing around – and with a challenge from National Treasury to collect billions more in tax revenue, it is gearing up to meet it.
The mid-term budget tabled by National Treasury in October shows that SARS is now expected to collect R1,682 billion in taxes this year – up R84 billion from the February Budget.
SARS commissioner Edward Kieswetter said that the revenue service has accepted the challenge. “While the revised revenue estimate is steep, we are committed to act according to what is permissible in law to meet this challenge,” he said.
Tax Consulting said that, hopefully, South Africans take heed of this warning, and a change in tax morality could be sparked.
“Taxpayers whose tax affairs are in a state of disarray should promptly take action to disclose their default to SARS in the correct manner. Timing is of the essence, as should SARS come knocking before your disclosure, the avenue of VDP (becomes) unavailable, and prison time beckons.”
Read: New court ruling sends a warning shot to anyone using tax loopholes to dodge SARS – even billionaires
