Under section 234 of the Tax Administration Act, 28 of 2011, containing a laundry list of criminal offences under a tax act, you could find yourself behind bars for anything from not paying your tax debts, to having outstanding tax returns.

Knowing when to act is imperative, and usually SARS’ firing squad are preceded by a Letter of Demand. Upon receipt, your sensors should immediately be on high alert as this is a serious matter and ignoring it can lead to severe consequences., It is crucial to address the highlighted non-compliance immediately. 

Ignore SARS’ Demands to Your Own Detriment

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, it is recommended 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 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 your financial ruin be SARS’ next strong statement!

REMEMBER, non-compliance with a tax act, is a criminal offense under South African tax laws.

AI and the Future of Tax Compliance

A common misconception amongst low-medium income earners, is “what SARS don’t know, won’t hurt me”. Don’t 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 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!

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 committed. 

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.

South Africa’s Commitment to FATF Standards

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 grey list. This includes escalating investigations and prosecutions of serious and complex money laundering cases, in terms of Immediate Outcome 7:

Excerpt from National Treasury Media Statement “FATF Greylisting”: South Africa’s Progress in Addressing its Action Plan as at 28 June 2024

In light of these developments, it’s crucial for taxpayers to address their tax obligations promptly. 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 reprieve for the aggrieved, where pro-active steps are taken.

Strategically Side-Stepping SARS Snipers

Where taxpayers need more time to meet their legal obligations, it may be possible to request an extension, however this is entirely at the discretion of a senior SARS official, and only in very limited circumstances. The risk of a request for extension being denied, is not worth taxpayers being lethargic in approaching the revenue authority to rectify what may very well just be an error in judgement on the part of SARS.

If you have filed your returns but failed to provide additional relevant information or received additional assessments from SARS, disputing these assessments may be a viable course of action.

It must be remembered that the substance of a dispute is tax law, which is well known for its fluidity and intricacies. Thus, the dispute process, being a hybridization of the law and SARS’ own protocols, is best handled by seasoned tax attorneys, who task themselves with understanding the nuances of tax law and knowing the most strategic stance to take, capitalising on the remedies afforded by the TAA to ensure favourable outcomes. 

Alternate Avenue for Resolution

It is also important to take cognisance of the tax debt relief measures as contained in the TAA, as where a taxpayer does not have legal merits to pursue an objection but has difficulty in settling their tax debt. In such cases, a Compromise of Tax Debt application (“the Compromise”) is always available to the taxpayer.  

The Compromise is aimed at aiding taxpayers to reduce their tax liability by means of a Compromise Agreement (“the Agreement”), which is entered into with SARS. Where SARS is approached correctly, and the taxpayer’s financial circumstances warrant it, a tax debt can be reduced, and the balance paid off in terms of the Compromise. 

In the end, total tax compliance is the ultimate goal, be it through the rectification of an error by SARS or securing a settlement which is more affordable to the taxpayer in a given instance.

The First-Mover Advantage

To protect yourself from SARS, ensuring compliance remains the best strategy. 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 both yourself and your bank balance from paying the price for what could be the smallest of mistakes. However, where things do go wrong, SARS must be engaged legally on all fronts.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a strong multi-faceted tax, legal, and financial team – the “A-Team”. This will not only serve to safeguard you against SARS implementing collection measures but also being specialists in their own right, you will be correctly advised on the most appropriate solution to ensure your tax compliance.

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA; and  Michelle Phillips, Tax Attorney at Tax Consulting SA