• Posted on Oct 16, 2020

Taxpayers need to be alerted that a planned change in legislation could mean that common errors with tax returns may be harshly penalised in future.

Source: Business Insider SA

Sep 03, 2020, 05:49 AM

Stupid tax mistakes may land you in jail soon, expert warns

Taxpayers need to be alerted that a planned change in legislation could mean that common errors with tax returns may be harshly penalised in future.

  • A planned change in legislation could mean that common errors with tax returns may be harshly penalised in future, a Werksmans Attorneys associate warns.
  • This could include jail time of up to two years.
  • Inadvertent errors include supporting documents being misplaced or late VAT or PAYE payments.

A planned change to legislation could mean that common errors with tax returns may be harshly penalised in future – including with jail time.

New draft legislation seeks to scrap the concept of “intention” from tax crimes – this means the prosecutors don’t have to prove that you wilfully broke the law, and the court can find you guilty of an offence even if you made inadvertent errors.

Specifically, section 34 of the draft Tax Administration Laws Amendment Bill, 2020 proposes to amend section 234 of the Tax Administration Act, which will remove the concept of willfulness (“intention) from the range of acts that constitute an offence under the TA Act. If you are found guilty, the maximum penalty is two years’ imprisonment.

"This is a concerning erosion of the safeguards against criminalising inadvertent mistakes by taxpayers," says Kyle Fyfe, a senior associate of Werksmans Attorneys.

It would mean that you could be guilty of an offence if you neglect to, for example, notified SARS of a change in registered details (addresses, bank accounts and email addresses), a change in public officer, submitting a return or document to SARS, responding to a request for documents or information from SARS, maintain records or pay taxes when due.

Fyfe says other common problems that could result in harsh punishment include:

  • Supporting documents being misplaced, or clerical errors, which result in adjustments to VAT returns by SARS. As VAT is a self-assessed tax, any adjustments to the return inevitably results in the taxpayer having failed to pay VAT to SARS on time.
  • Late payments of VAT or PAYE by businesses, where a payment is only released late on a Friday night, and is not received by SARS until the next day.
  • Taxpayers that are unaware they may have a tax liability due to increasing complex provisions of the tax laws, and then fail to pay the correct amount of VAT or PAYE to SARS timeously.

"In all of these circumstances, SARS is able to impose penalties on taxpayers (as it often does), which makes the need for the amendments to section 234 of the TA Act, and additional criminal sanctions, questionable."

The draft bill states that requiring proof of intention by a taxpayer substantially undermines the ability of SARS to ensure compliance – and hampers the criminal prosecution of noncompliant taxpayers by the National Prosecuting Authority.

"However, it has always been the case that a wide variety of crimes require proof of intent. While a person’s subjective intent may be difficult to establish in some circumstances, it is often inferred from the person’s conduct," says Fyfe.

Further, the presumption that a statutory crime requires proof of intention, instead of negligence, or strictly liability, is in order to avoid the injustice and hardship that may result from the serious punishment that may be imposed in the event that the accused is found guilty, he contends.

"These considerations do not appear to concern the government, and it is likely that if passed, the threat of criminal sanction will be used by SARS to force taxpayers to comply with their obligations, particularly relating to the filing of returns and payment of tax debts."

"Further, while it has, in the last few years, been uncommon for SARS to seek criminal prosecution of taxpayers except in the most egregious cases of non-compliance, we should all be concerned that this position could change at any time if the amendments to the TA Act are passed, and taxpayers could be criminally liable for inadvertent errors."

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