Tax Consulting SA dissects SARS' new position on fraud

26 March 2020 2 min. read
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Tax Consulting SA has lauded the South African Revenue Service’s (SARS) new hardline stance on defaulting as an effective means of improving collections in the country. This stance includes imprisonment for violation of a variety of tax regulations.

Some of the cases highlighted by Tax Consulting SA include the sentencing of two individuals to nearly two decades in prison last month, after evidence of tax fraud was considered by the Cape High Court. More than 80 other taxpayers have recently been sent to prison for violation of VAT regulations.

These are among a range of other cases that have recently been clamped down upon, after SARS changed its stance on non-compliance last year. SARS commissioner Edward Kieswetter indicated at the Tax Indaba in August last year that defaults and fraud will be criminally persecuted, and the agency is now delivering on this stance.

The new position is the latest in a series of measures that SARS and the finance ministry have taken recently in an attempt to halt fraud and defaulting in the country. Collection levels in South Africa have been falling well short of their targets, putting significant strain on government finances.

Tax Consulting SA dissects SARS' new position on fraud

Measures such as tax hikes, public shaming and even the latest expat tax have all been aimed at easing this revenue pressure. According to Tax Consulting SA officials, the latest stance is likely to prove the most effective, as it will jolt citizens out of their complacency and push them to comply. 

“Since the Tax Indaba, we have seen SARS score several victories, but SARS’ media page over past month in particular paints the picture of a revenue authority that should not be tested,” said the firm. It is important for “taxpayers to regain a respectful fear for SARS; which is really the sweeping change we need.”

If there is one complaint, the firm argues that the new criminal persecution has tended to target wealthy individuals. While these taxpayers default and defraud by large amounts, the firm argues that ensuring compliance among a mass of citizens in the middle-income bracket will be more effective in boosting revenues, given that this economic segment appears to have dropped out of tax compliance in recent years.

“SARS is losing out on collections from the mere mortals – those taxpayers who perhaps used to be compliant, but as SARS lost its deterrence factor, they found it too easy not to pay their taxes,” said the firm.