With the list of criminal convictions under SARS’ belt racking up, tax fraud seems to be the flavour of the year, with the National Prosecuting Authority sending in reinforcements to aid SARS’ cause – the total eradication of non-compliance!

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.

In the course of filing your tax returns, should you submit any false, incomplete, or misrepresented information, to SARS, this too may land you in some very hot water, not unlike the plethora of local celebrities facing jail-time or insurmountable penalties.

Convictions Over Collections?

SARS is very transparent in affirming its mandate, being to collect revenue. That being said, the recent barrage of criminal convictions for “serious tax offences” does raise the question; Convictions over Collections?

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, 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

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

Rental Income on Revenue Collector’s Radar

The SARS / NPA team-up has made clear that there are no prisoners of war, only the most targeted career-assassinations. Ranging from those taxpayers we trust with our lives, such as medical professionals like Dr. Fabian Royston Tun (convicted of failure to submit personal income tax returns and VAT returns), to local celebrities, and those they trust with their food, such as Chef Lusizo Mvula Henna (convicted of fraudulent VAT claims), SARS’ zero-tolerance stance on non-compliance is clear.

Thinking SARS’ radar is focused only on the high-flyers is likely the last mistake a non-compliant taxpayer will make. Commissioner Kieswetter could not have been clearer in SARS’ Media Statement of 28 June 2024:

“The use of technology and data has enhanced SARS’ ability to detect instances of non-compliance. Taxpayers must not inflate their expenses and under-declare their income to obtain impermissible refunds. Not including rental income is an example. Such actions will make the taxpayer potentially guilty of fraud.” (emphasis added)

Strengthened Tax Treatment on Secondary Income

With Kieswetter specifically referencing rental income, it could not be clearer that secondary income items are a focal point for SARS’ compliance canons this filing season; after all, the larger your war-chest, the more tax revenue to be received!

Looking beyond just rental income, ensuring correct disclosure on any interest earned, policies paid out, or even that nightshift for some extra cash, is essential to ensure you are not added to the SARS Snipers’ Hit List.

It was imminent that SARS, whilst in the process of upgrading their systems to modernise the face of tax in South Africa, would be enabled to better prosecute non-compliant taxpayers – this is the new reality, and compliance is key.

The Best Defence is a Good Offense

In order to protect yourself from being the next casualty in the war on non-compliance, it remains the best strategy that you always ensure your tax affairs are kept in order, heeding SARS’ warning that non-compliance will be both hard and costly for taxpayers. Where taxpayers find themselves in a potentially precarious position of now disclosing previously undeclared interests, or foreign / secondary income, the best practice is to seek the assistance of a tax professional, ensuring the best compliance strategy is followed. 

Should you already find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate legal counsel, ensuring the necessary steps are taken, under legal professional privilege, and providing a degree of protection to your kingdom and war chest. In most instances of potential conviction on commission of a tax offence, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax and compliance strategy is followed.

As a rule of thumb, any and all declarations of war received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to compliance, rather than conviction.

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA