Three things South African taxpayers must watch out for

The South African Revenue Service’s (SARS) crackdown on non-compliance could see taxpayers jailed for anything from not paying their tax debts to having outstanding tax returns.

This is according to Tax Consulting SA’s Jashwin Baijoo and Michelle Phillips, who said knowing when to act is imperative when dealing with SARS.

SARS’ firing squad is usually preceded by a Letter of Demand, and upon receipt, “your sensors should immediately be on high alert.” This is a serious matter, and ignoring it can lead to severe consequences.

“It is crucial to address the highlighted non-compliance immediately,” they said.

“Failure to comply can lead to overwhelming tax debt, severe collection measures, or even jail time as evidenced by the plethora of convictions secured by SARS, against local celebrities, doctors, and VAT Fraud perpetrators.” 

Should you receive any of the below, Baijoo and Phillips recommend you immediately engage the assistance of a tax attorney, guaranteeing legal professional privilege – 

• Request for relevant material: When SARS requests additional information, taxpayers must comply promptly and within the permissible timeframe provided by SARS.
• Final letter of demand: Failure to respond to a final demand for payment of outstanding taxes can result not only in the sheriff of the High Court paying you a visit but also in potential jail time – you have 10 business days.
• Filing your taxes: In an era of intensified tax enforcement, failing to submit your tax returns will have serious consequences.

“Receiving a Letter of Demand from SARS is never to be ignored, and often, where the correct response is not timeously delivered, spells the beginning of the end for the recipient taxpayer – don’t let your financial ruin be SARS’ next strong statement,” they warned.

They added that it is important for taxpayers to realise that non-compliance with a tax Act is a criminal offence under South African tax laws.

A common misconception among low-medium income earners is that “what SARS don’t know won’t hurt me.” 

However, they warned these taxpayers not to make the same mistake the affluent have already learnt from – “SARS, and other revenue authorities around the world, know more about your finances than your own family do”.

“With the enhanced efficiency propelled by SARS’ use of AI data-driven compliance insights, ‘Open Season’ on non-compliant taxpayers is year-round, but Filing Season presents a unique opportunity for SARS’ expert marksmen to step up,” they said.

They explained that the integration of AI into SARS’ compliance strategies marks a significant leap forward. 

AI capabilities enable SARS to identify and address non-compliance more effectively, increasing the likelihood of forensic investigation and prosecution for tax offences.

This initiative is particularly significant in the context of South Africa’s commitment to the Financial Action Task Force (FATF), a global leader in the fight against money laundering and terrorist financing.

Last year, South Africa was added to the FATF’s dirty money watchlist – the so-called “greylist” – for failing to comply with international standards to combat money laundering and terrorism financing.

Since February 2023, South Africa has made considerable progress in enhancing its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. 

Despite these strides, South Africa must continue to address its strategic deficiencies to be removed from the FATF’s greylist. 

This includes escalating investigations and prosecutions of serious and complex money laundering cases.

“In light of these developments, it’s crucial for taxpayers to address their tax obligations promptly,” Baijoo and Phillips said. 

“The longer you delay, the higher the risk of facing severe penalties, including criminal prosecution.” 

“Proactive measures can significantly reduce your exposure to these risks. There is always a reprieve for the aggrieved, where pro-active steps are taken.”