The South African Revenue Service (SARS) and the Directorate for Priority Crime Investigation (Hawks) have teamed up on a new strategy to find and prosecute taxpayers who do not accurately declare their taxable income.
This comes after the National Treasury recently reported that tax revenue for the year so far has been far lower than expected and that the country faces a significant budget deficit.
Tax Consulting SA’s head of tax controversy and dispute resolution André Daniels said these fiscal pressures have now compelled SARS to actively initiate the arrest and prosecution of taxpayers who do not accurately declare their taxable income.
“For a long time, it has been warned that SARS possesses third-party information from banks, financial institutions, estate agents, car dealerships, etc., enabling them to identify those who are not declaring their income correctly,” Daniels said.
“However, many South Africans have not taken this message seriously enough to declare accurately and fulfil their tax obligations.”
“They may have felt a false sense of comfort from the seeming hesitance of SARS to actively enforce its mandate through criminal enforcement. This situation appears to have suddenly changed.”
For example, News24 recently reported that an Eastern Cape doctor was arrested for numerous tax fraud charges.
According to the South African Police Service (SAPS), the investigations revealed that the accused prejudiced SARS by more than R1.8 million between 2015 and 2018.
Red flags were raised during an audit, and a complaint was lodged with the Hawks for investigation. The accused’s alleged offence is under-declaring his income.
“As SARS continues to scrutinise non-compliance, whether done intentionally or not, wrongfully, falsely or under-declaring under tax law means repercussions,” Daniels said.
“While many taxpayers have slept peacefully in the past, foreseeing the worst that can happen is a slap on the wrist with some penalties and interest; a new Hawks/SARS prosecution strategy is a game-changer.”
Daniels warned that taxpayers should take special care to make sure their tax return is done on a complete and correct basis.
“They should also carefully have a look at past disclosures in their tax returns and whether the numbers disclosed are correct and ‘everything adds up.”
Daniels also pointed to the Voluntary Disclosure Programme (VDP) as a lifeline that offers taxpayers with skeletons in the closet an opportunity to voluntarily disclose their tax defaults to SARS.
The programme also allows the disclosure of underdeclared income or understatement of tax liabilities.
Most importantly, Daniels said that a correctly obtained and SARS-accepted VDP means that you cannot be criminally prosecuted.
“While this lifeline remains available, there are, of course, legislative requirements one should meet when applying for relief under the VDP,” said Daniels.
“For instance, an applicant should be a registered taxpayer with SARS and be up to date with their tax filing obligations.”
“The VDP process is also not as simple as many believe. There are a couple of cases where SARS have challenged a VDP obtained and won, as it was obtained with an irregularity or technical error when obtained.”