19 Nov SARS And The Criminal Justice
“First make the reader aware of the pain by rubbing salt in the wound, then offer him a soothing balm”.
In the past few weeks this strategy has been applied both by SARS and CIPC. CIPC has obtained court orders imposing administrative fines of 10% of turnover for non-compliant companies (CIPC, 2018) and SARS has obtained criminal convictions against delinquent taxpayers for non-submission of returns (SARS, 2018). Both have been well publicised with the intention of scaring you into compliance. While compliance is not always palatable it is morally, ethically and legally right.
The question is – are you exposed to criminal action if you have outstanding tax returns?
In this article, to give you an indication of your exposure to criminal action, I will explore the legal framework which SARS is required to follow.
SARS published an article on its website in July 2017 emphasising SARS’ role in enforcing tax and customs laws. In this article SARS highlights that it is empowered through legislation to conduct criminal investigations into tax offenses, and once those investigations are finalised, to refer the matter to SAPS and the National Prosecuting Authority for them to determine whether or not to charge the offender with a crime (SARS, 2017).
The prominent piece of legislation under which SARS is likely to act is the Tax Administration Act. The TAA defines a tax offence as “an offence in terms of a tax act or any offence involving fraud on SARS or on a SARS official relating to the administration of a tax act, or theft of moneys due or paid to SARS for the benefit of the National Revenue Fund”. A serious tax offence is defined as (inter alia) “one where a person may be liable on conviction to imprisonment for a period exceeding 2 years without an option of a fine”.
In addition to the above two definitions which have a bearing when SARS’ conducts tax audits, the TAA also specifically criminalizes non-compliance for the following:
- If you do not update your details with SARS;
- If you do not appoint a representative taxpayer;
- If you do not submit a return or document to SARS;
- If you do not retain your records;
- If you submit a false certificate or statement;
- if you fail to answer SARS correspondence or notices;
(For a complete list see sections 234 to 237 of the TAA.)
The list above is not new and was in fact part of the TAA which became effective from 1 October 2012. What is new, is SARS’ emphasis on pursuing the criminal aspects.
In order for SARS to pursue the criminality of tax offences, SARS must remain within the boundaries of its powers defined through legislation. The Constitutional Court has held that all statutes that authorise administrative action must be read together with Promotion to Administrative Justice Act (PAJA) unless the provisions of the statutes in question are inconsistent with PAJA. PAJA gives effect to the person’s right to administrative action that is lawful, reasonable and procedurally fair. The effect of this is that SARS must:
- Give prior notice of the intended act or decision
- Provide an opportunity for the taxpayer to make representations before a decision is taken
- Provide clear grounds for the decision
- Provide adequate notice of the right to request reasons for the decision.
There are also specific rules set out in section 43 of the TAA which govern how SARS can use evidence gathered during a SARS audit which result in a criminal investigation. These are not covered here. Suffice to say that these protect a person’s right not to incriminate themselves.
In conclusion, it is vitally important that you make sure that you are diligent about your compliance and secondly, that you make sure that you always pay attention to and respond to SARS correspondence. Doing so will significantly reduce your risk of administrative action by SARS.