SARS is starting to take steps to tackle large enterprises flagrantly operating outside the law – specifically those committing tax fraud – and actively pursuing criminal action against them. Many of these successes have been reported in national publications to make it clear to fraudsters that SARS will no longer stand by and allow fraud to hamstring tax collections. SARS are continuing to make voluntary compliance easy though, so there is no reason for non-compliance. In cases of non-compliance, SARS is determined to see taxpayers convicted of tax fraud serve significant jail time.
So, what should the organisations who fall into the ‘errant taxpayer’ category do? The most important thing is to take the opportunity presented by the SARS Voluntary Disclosure Programme (VDP) to advise SARS of any non-compliance in their tax affairs. The Tax Administration Act provides relief to taxpayers who come clean to SARS. A VDP application to SARS is also the only way to avoid a worst-case scenario with SARS. Through the VDP, SARS agrees to grant amnesty from criminal prosecution and to waive all understatement penalties where the taxpayer approaches SARS with an application before notification of audit or criminal investigation. The exception to this is in instances of gross negligence and intentional tax evasion, where the penalties are charged at 5% and 10% respectively.
The VDP process is not a simple process, with the applicant having to comply with the following requirements:
- The disclosure must be submitted before the taxpayer is notified of an audit or criminal investigation by SARS
- The disclosure must be made voluntarily
- A disclosure must not have been made for a similar ‘default’ in the preceding five years
- The disclosure must be fully described and complete in all materials aspects
- The disclosure must not trigger a refund due by SARS
- The disclosure must be made in the prescribed form and manner.
Should the VDP application be accepted by SARS, a VDP agreement is concluded between the taxpayer and the commissioner of SARS. In this agreement the material facts of the matter are outlined, and a payment plan for any amounts due to SARS are agreed on. SARS in turn will waive any criminal prosecution and remit any understatement penalties. Interest is however always payable.
The message is clear that SARS is not shying away from the tax collection challenges set by National Treasury. It is resourcing itself in terms of skilled employees and the latest technology to identify areas where there is material non-compliance. There must be a significant change in attitude by taxpayers towards their tax obligations. We advise taxpayers whose tax affairs are not in order to make full disclosure to SARS, before SARS has them on their radar. By then it is too late, and sanctions (and possibly jail time) could await the applicable taxpayers or representative employers. Top of Form
It is imperative to get assistance from tax practitioners who have experience in this space, as any misstep may prove to be very expensive. Delaying compliance can also be expensive. Our experienced tax team can assist clients through the VDP process and ensure that your organisation stays compliant going forward. If your company is in any way non-compliant, we urge you to contact us immediately on [email protected] .