SARS is targeting the directors of companies who fail to submit their tax returns.

The move forms part of SARS’s broader strategy to combat tax evasion and ensure that all corporate entities and their directors meet their tax obligations.

The agency previously relied heavily on administrative penalties and audits to encourage compliance.

However, the persistence of intentional non-compliance among some company directors has necessitated more drastic measures be implemented.

This new enforcement strategy aims to hold individuals vicariously accountable for the financial management of their companies, as directors have a fiduciary duty to ensure that their companies comply with tax laws.

Failure to do so not only undermine a healthy tax ecosystem but also places an unfair burden on compliant taxpayers.

Under South African law, it is a criminal offence for company directors to not submit their corporate income tax returns and those pertaining to payroll taxes and VAT.

The Tax Administration Act means that directors who fail to ensure the timely submission of their companies’ returns will face major penalties, such as fines and, in some instances, imprisonment.

The criminal summonses issued by SARS indicate the beginning of legal proceedings that could lead to prosecution.

If found guilty, directors could face imprisonment of up to two years per successful conviction of any criminal offence related to non-compliance.

Several high-profile cases involving directors have already occurred.

Public reaction to SARS’ compliance crusade has been mixed, however, many taxpayers and advocacy groups have welcomed the move, viewing it as a necessary step to ensure just and equitable treatment within the framework of our tax system.

They argue that stringent enforcement against non-compliant directors will deter others from similar misconduct and ultimately enhance the integrity of the tax regime.

However, some business leaders have expressed concerns about the potential for overreach and the impact on business operations. They urge SARS to balance enforcement with support, providing more guidance and resources to help companies in voluntarily meeting their tax obligations.

SARS’s issuance of criminal summonses is part of a broader initiative to strengthen tax compliance in South Africa, with the agency deploying its data analytics capabilities to identify non-compliant taxpayers efficiently and deploying more resources to audits

The agency has also been enhancing its data analytics capabilities to more effectively identify non-compliant taxpayers and deploy more resources to its audit and investigation teams.

That said, Commissioner Kieswetter has reiterated that while enforcement is necessary, SARS will engage with the business community to promote voluntary compliance.

SARS has indicated on many occasions that it aims to make compliance easy and cost-effective while making non-compliance difficult and costly.

 

 

The South African Revenue Service is desperate to extract as much money as possible from taxpayers, and the nefarious activities are in the taxman’s firing line.

Although many taxpayers expect minor repercussions such as fines and interest charges, a new protection strategy, with the help of the Hawks, South African Police Service (SAPS), and the National Prosecuting Authority (NPA), is becoming more aggressive over non-compliance.

Amid mounting pressure on tax collections and non-compliance, the entity is actively targeting taxpayers who fail to disclose their taxable income accurately.

The taxman’s efforts have resulted in record tax collection figures, with collecting R2.155 trillion in tax revenue for the fiscal year ended March – R10 billion more than the Treasury had even predicted.

One reason for the increase was the 8% growth in personal income tax (R651 billion), with SARS making a concerted effort to target citizens who avoid their tax obligations or do not submit their returns correctly under the willful non-compliance category.

The revenue office relies on personal information, AI and machine learning algorithms to identify and flag non-compliant taxpayers.

SARS looks at flight activity (such as frequent international travel) and luxury purchases (such as high-end vehicles or luxury vacations) and could execute a luxury audit to verify if an individual displays a lifestyle that does not match the tax return.

Through its specialist High Wealth Individual Unit and the Specialized Audit Unit, SARS has managed to achieve record tax revenue.

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.

Over the 2023/24 fiscal years, SARS was successful in 94 of the 110 cases that were handed down, an 84% litigation success rate.

SARS offers a Voluntary Disclosure Programme (VDP) to individuals, companies, or trusts to voluntarily disclose and resolve their tax matters, as long as they are not under or expecting an audit or investigation from SARS or have reached a request for inflation from SARS.

Proactively rectifying tax defaults not only brings compliance relief but also significantly lowers the risk of penalties and legal repercussions.

 

The South African Revenue Service (SARS) is fighting a war on non-compliance, and taxpayers shouldn’t think that they can hide any information from the taxman.

Individual taxpayers, provisional and non-provisional, will be able to file their annual tax returns from 15 July 2024.

With the enhanced efficiency propelled by SARS’ use of Artificial Intelligence (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.

Despite the examples of the rich flouting tax laws and ending up in jail, the average Joe should also keep in mind that they can end up in the same hot water.

The average person may not know that they have stepped on the wrong side of SARS’s war on non-compliance, with section 234 of the Tax Administration Act providing a list of actions and inactions which constitute criminal offences.

This list includes acts committed based on an absence of tax literacy, such as retaining specific documentary items or issuing an incomplete document to SARS.

On the flip side, failure to commit acts, such as the submission of a tax return or notifying SARS of a change in registered particulars, may also result in criminal charges being laid against you.

Whilst the listed offences range from the obvious, such as pretending to be a SARS official, to the seemingly unassuming, such as submitting erroneous statements to SARS, they all carry a liability, upon conviction, of a fine or a maximum prison sentence of 2 years.

Low- and medium-income earners often believe that they hide information from SARS, but the revenue service likely knows more about your finances than your family does.

SARS also has multilateral engagements, with automatic information exchanges with revenue collection agencies worldwide.

Although this information gathering capability has been tried and tested, the issue was a lack of manpower to effectively process and prosecute those guilty parties – the solution is SARS’ pilot AI project.

This AI capacity-bolstering technique has already been seen across SARS’ historic audit processes, where it is used to maintain thoroughness and accuracy while deriving data-driven insights almost instantaneously.

This move underscores a broader trend towards the integration of technology in tax administration, promising to revolutionize the way tax compliance is monitored and enforced.

If one finds themselves in SARS’s crosshairs over non-compliance, it is crucial that they make a timely response to SARS with all the correct supporting documentation.

Those who fail this first hurdle will also have made an incorrect disclosure to SARS. They will feel additional pressure when additional assessments are raised, or final demands are received for overdue tax debts.

The nail in the coffin is always the Understatement Penalties, capping at a bank-breaking 200% of the capital taxes due.