SARS gets tough on tax offenders

Wednesday, October 14, 2009

Johannesburg - The South African Revenue Services (SARS) on Wednesday unveiled a string of new administrative penalties in a bid to crack down on non-compliant tax payers.
The penalties come into effect on 23 November 2009.

In effect, taxpayers have until 20 November 2009 this year - the final deadline of the 2009 Tax Season - to submit any outstanding returns in order to avoid being penalised under the new penalty regime.

The Administrative penalty regulations legally came into effect on 1 January 2009 and provide for the imposition of penalties for a range of non-compliance, including failure to register as a taxpayer, failure to inform SARS of a change of address and other personal particulars, and failure to submit tax returns and other documents to SARS.

SARS delayed the effective implementation of the new penalties to allow sufficient time for taxpayers to rectify any non-compliance and for SARS to develop its own systems to automatically issue penalties for non-compliance.

The implementation date will be phased-in over a period of time, beginning on 23 November 2009 for taxpayers with outstanding income tax returns.

In the interest of fairness SARS will first impose the new penalties against repeat offenders - taxpayers who have failed to submit returns for multiple years.

The new regulations, will see taxpayers who fail to submit their tax returns, receive penalties ranging from R250 to 16 000 a month, depending on the individual's salary.

The penalties will recur each month for as long as the income tax return remains outstanding. The regulation allows for penalties to be applied each month or part thereof for up to 35 months allowing penalties to be automatically doubled monthly. This means a person earning about R300 000 a year and fails to submit a tax return for 35 months can end up paying a penalty of close to R500 000.

SARS Commissioner Oupa Magashula said the implementation and details of the new penalty regulations have been communicated and explained to all relevant stakeholders, including professional bodies representing tax practitioners.

Magashula described the current penalty regime as "ineffective" vowing that under the new regime; SARS will not be tolerant of tax offenders.

A SARS report reveals that a staggering 5.3 million returns due to the institution were outstanding in the financial year period 2007/2008 and legal action had to be taken against 81 000 taxpayers. According to Magashula, the number currently stands at just over three million.

"If we continue to tolerate this non-compliance that is when we will see our tax system falling flat and the legitimacy of the state undermined. "We are very serious about making sure that we improve the level of compliance in our country," he said.

SARS has already drawn up a list of those who had failed to comply in the previous tax season. "In the interest of fairness, SARS will first impose the new penalties against repeat offenders such as taxpayers who have failed to pay their taxes for multiple years.

According to the revenue service's head of legal and policy affairs Kosie Louw, it is envisaged that SARS may during that 35-month period appoint an agency to collect the money. In extreme cases a repeat offender could even be criminally charged.

As part of the collection process, SARS will approach employers, to act as agents in terms of the relevant tax legislation.

"We want people to understand the implications of not filing on time and failure to meet their obligations," Magashula said