A new set of tax law amendments make it possible for the South African Revenue Service (SARS) to impose criminal sanctions on taxpayers who neglect their tax affairs.
The amendments, signed by President Cyril Ramaphosa and promulgated on 20 January 2021, makes unintentional tax errors punishable by a fine or imprisonment.
This is a step away from the previous legislation where taxpayers could only be fined or sent to jail if their transgression were committed “wilfully and without just cause”.
“The law previously required an element of intent. If negligence or ignorance caused your administrative non-compliance, you would have gotten off with a slap on the wrist,” said Tax Consulting SA attorney Roxanna Naidoo.
With the new legislation in place, however, your intention does not matter.
“Where you negligently fail to comply or make mistakes on your taxes, you commit an imprisonable criminal offence,” said Naidoo.
Ignorance, a defence commonly used by taxpayers, will also not cut the mustard under the new legislation.
Commenting on the tax amendment legislation, SARS commissioner Edward Kieswetter said this is not a new concept in law.
He highlighted that this is an international practice. “In countries like Australia, Canada, and New Zealand intent is not required to prosecute tax offences.”
The new laws are, however, not a licence for SARS to throw anyone in jail for not fulfilling a tax obligation.
To successfully prosecute someone, the state must still prove ‘blameworthiness’ beyond reasonable doubt. This can be done on two principles:
- Proving negligence, where you had knowledge of the transgression but ignored to apply the knowledge.
- Intent, where you chose intentionally ignore application of the law.
“It is therefore not a free-for-all for SARS. The state still has to prove blameworthiness,” Kieswetter said.
He added that SARS’s approach and strategic intent to deal with tax-related issues are:
- Provide clarity and certainty to taxpayers about their tax obligations.
- Make it easy to fulfil their tax obligations.
- If SARS detects non-compliance, for any reason, whether it is negligent or with intent, it will respond using all instruments in law.
“Our approach is not to catch taxpayers doing something wrong, but always to assist them to do the right thing,” Kieswetter said.
Werksmans Attorneys director, Doelie Lessing said the amendments remove SARS’ obligation to prove intention before a taxpayer could be found guilty of these non-compliance offences.
The lower threshold to criminally prosecute taxpayers has been met with fierce resistance from tax practitioners and civil society.
This is because the removal of the element of wilfulness provides less protection of taxpayers who make unintentional mistakes when doing their tax returns.
Lessing said that the legislation has, however, not done away with intent entirely. Instead, it introduced a differentiated approach of which the existing list of non-compliance offences has been split into two categories:
- Offences that require wilfulness, where the heavier burden of proof falls on SARS.
- Offences in respect of which “negligence” will suffice to trigger potential criminal liability.
The two categories of offences under the new Tax Administration Laws Amendment Act, 2020, are outlines in the tables below.
|11 offences which could give rise to criminal liability, only if the taxpayer committed them with intent|
|Submitting a false certificate or statement in relation to returns, records and reportable arrangements|
|Issuing an erroneous, incomplete or false document|
|Failure to reply to or answer truly and fully any questions put to the person by a SARS official|
|Obstructing or hindering a SARS official in the discharge of duties.|
|Refusal to give assistance during an audit or criminal investigation.|
|Holding oneself out as a SARS official|
|Dissipating assets or assisting another person to dissipate assets in order to impede the collection of tax.|
|Using any amounts deducted by way of employees’ tax for purposes other than paying it to SARS|
|Issuing documents purporting to be employees’ tax certificates if not an employer or authorised to issue|
|Declaring that the price chargeable in respect of supplies is subject to VAT, where in fact no VAT is payable or charging VAT in excess of the VAT properly leviable|
|Issuing more than one tax invoice, credit note or debit note in respect of a VAT supply|
|17 offences which could give rise to criminal liability, even if the taxpayer committed them without intent|
|Failure to register for tax or to notify SARS of a change in registered particulars|
|Failure to appoint a representative taxpayer or to notify SARS a change in representative taxpayer|
|Failure to register as a tax practitioner if required to do so.|
|Failure to submit a return or document to SARS or the failure to issue a document to a person as required under a tax Act|
|Failure to retain records as required|
|Failure to furnish information or documents requested, excluding information requested for revenue estimations.|
|Failure to give evidence when required.|
|Failure to comply with a SARS directive.|
|Failure to disclose to SARS material facts required.|
|Failure to comply with tax payments including third party payments.|
|Failure to comply with withholding tax obligations when required.|
|Failure to issue any employees’ tax certificates or to notify SARS of having ceased to be a registered employer.|
|Failure by an employer to deliver to any employee or former employee any employees’ tax certificate or notify SARS of having ceased to be a registered employer|
|Failure to submit provisional tax estimates.|
|Failure to comply with the payment of VAT on imported services and otherwise. Failure to submit VAT returns and special records.|
|Failure to include VAT in the advertised or quoted price or failure to separately indicate the VAT exclusive price and the VAT inclusive price.|
|Failure to keep sufficient records as required.|