Taxpayers, beware of Sars’ bolstered prosecution powers

The South African Revenue Service (Sars) commissioner Edward Kieswetter. Picture, Independent Newspapers.

The South African Revenue Service (Sars) commissioner Edward Kieswetter. Picture, Independent Newspapers.

Published May 7, 2024


By: Jashwin Baijoo

THE Gauteng High Court, Johannesburg, handed down an unfathomable sentence of a cumulative 205 years behind bars to a “Value Added Tax (VAT) Fraud Syndicate” in April 2024. Broken down, individual sentences ranged from five to 65 years for fraudulent VAT claims, estimated at over R200 million.

As mind-boggling as the number and sentence are, criminal convictions from Sars have been plentiful over the last few years, stemming from lifestyle audits, fraudulent return submissions, and anything else deemed a “serious tax offence”. As the average South African, you may ask yourself what qualifies as “serious” and what other sanctions could such a conviction entail.

In short, the Tax Administration Act (TAA) 28 of 2011 defines a “serious tax offence” as below:

“Serious tax offence” means a tax offence for which a person may be liable on conviction to imprisonment for a period exceeding two years without the option of a fine or to a fine exceeding the equivalent amount of a fine under the Adjustment of Fines Act, 1991 (Act no.101 of 1991).“

* Excerpt from Section 1 of the TAA, being the “Definitions” section.

Criminality of non-compliance

In practice, a “tax offence” can take the form of any contravention of a tax act, including the criminal offences specifically listed and about 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, including, but not limited to:

- Submission or issuance of false documentation/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 that has long been on the cards for the revenue collector and is simply now more public than before.

For context, the National Prosecuting Authority (NPA) took its seat at Sars’ round table back in 2003 by virtue of a Memorandum of Understanding (MOU). The MOU was further updated in 2019, after which the barrage of criminal cases involving tax evasive manoeuvres fell into the realm of “public interest”.

One key point of the MOU is the undertaking by the NPA to establish a Specialist Tax Component, whose role would be the prosecution of serious and complex, high-level tax offences, which we have seen the Sars/NPA team making good on over the past few years.

NPA adds weight to Sars’ crusade on non-compliance

Over the course of the years, since the “prosecution coalition” commenced, the tempo picked up, with successful prosecutions against both individuals and companies ranging from account-draining fines to life-altering prison sentences.

We have seen first-hand how both the fines and sentences imposed have escalated over time, with the NPA becoming almost surgical in its prosecutions and fully utilising the lower burden of proof to seal convictions on tax-related offences.

Now is not the time to take risks. Sars’ approach clearly shows we are dealing with a competent revenue authority, so why risk it when compliance is the preferred way forward, which Sars is willing and ready to assist all taxpayers with, as advised by Commissioner Edward Kieswetter, stating that Sars will do its best to “make it easy and seamless for taxpayers when they transact with the organissation”.

This statement, when Sars is correctly legally engaged, is made by a revenue authority that is steadily aligning itself with international standards and climbing back to its former prestige as one of the world’s finest.

The best strategy for remedying non-compliance

Our insight into the market has noted Sars upping its collection power, with sometimes aggressive collection steps including salary garnishes, sheriff callouts, and even taking money directly from business and/or personal accounts.

To protect yourself from financial ruin and even possible jail time, it remains the best strategy that you always ensure compliance.

Where you find yourself on the wrong side of Sars, there is a first-mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to protect yourself and your unblemished record from paying the price for what could be the smallest of mistakes. However, where things do go wrong, Sars must be engaged legally.

As a rule of thumb, any and all correspondence received from Sars should be legally addressed, as often legal professional privilege is a must in instances of non-compliance. This will not only serve in safeguarding against Sars implementing collection measures or potentially criminal charges, but also being specialists in their own right, taxpayers and practitioners will be correctly advised on the most appropriate solution to ensure full tax compliance.

* Baijoo is the head of strategic engagement and compliance at Tax Consulting SA.