SARS taxpayers crackdown with harsher punishments

SARS is intensifying its scrutiny of South African taxpayers by collaborating with the Hawks to investigate defaulting taxpayers and hand down harsher punishments. 

While many taxpayers have previously expected minor repercussions such as fines and interest charges, SARS has introduced a revised prosecution strategy. 

With the assistance of the Hawks and SAPS, it promises harsher punishments for taxpayers who default and tighter compliance with regulations. 

Danielle Luwes, tax director at Hobbs Sinclair Advisory, said that all indications suggest the tax authorities actively pursue the arrest and prosecution of taxpayers who fail to disclose their taxable income accurately. 

The fruits of SARS’ efforts are evident in the record tax collection figures. For the fiscal year ending March, SARS collected gross tax revenue of R2.16 trillion—R10 billion more than the Treasury’s last estimate in February. 

The 2023/24 tax take was R52 billion more than the previous year, thanks to more than 8% growth in VAT (R448 billion) and personal income tax (R651 billion). 

These figures indicate a significant increase in tax compliance and a clampdown on outstanding personal income tax. 

SARS is making a concerted effort to uncover individual citizens who are avoiding their tax obligations or not submitting correctly under the wilful non-compliance category. 

The revenue office relies on personal information, artificial intelligence, and machine learning algorithms to track activity and red-flag non-compliant taxpayers. 

SARS will monitor flight activity, such as frequent international travel, and luxury purchases, such as high-end vehicles or luxury vacations, and conduct a luxury audit to determine whether an individual exhibits a lifestyle that does not match the tax return. 

“We have seen in recent reports of individuals being arrested and imprisoned, which is a serious warning that being non-compliant is a very dangerous place to be,” she warned.

Aside from homing in on taxpayers, SARS is also imposing harsher punishments on South Africans who default on their tax payments. 

Tax Consulting SA’s Jashwin Baijoo said the Johannesburg High Court recently handed down a sentence of a cumulative 205 years behind bars to a “VAT Fraud Syndicate”.

Broken down, individual sentences ranged from 5 years to 65 years for fraudulent VAT claims from SARS, estimated at over R200 million.

He said that while this is just one case, criminal convictions from SARS have been plentiful over the last few years.

These convictions stem from lifestyle audits, fraudulent return submissions, and anything else deemed a “serious tax offence”. 

A “tax offence” can take the form of any contravention of a tax act including the criminal offences specifically listed and in relation to taxpayer non-compliance.

“This may come across as quite broad, and perhaps that is the intention as taxpayers may face fines or even imprisonment for a wide range of contraventions,” he said.

Therefore, tax offences could include –

• Submission or issuance of false documentation or certification.
• Obstruction of a SARS Official in carrying out their duties.
• Failing to notify SARS of a change in registered details.
• Failing to submit a tax return or retain sufficient records.

“These strong statements on eradicating non-compliance by SARS may be perceived by the man on the street as a recent development, but criminal prosecution is something which has long been on the cards for the revenue collector and is simply now more public than before,” Baijoo said.