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SARS Media Release: Warning To Taxpayers On Fraudulent Tax Returns

15 October 2013   (8 Comments)
Posted by: Author: SARS Legal and Policy
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Author: SARS Legal and Policy

SARS wants to appeal to all taxpayers to exercise caution if they are approached by "tax advisors” who guarantee them a tax refund on submission of their income tax returns. Anyone who guarantees a taxpayer a tax refund may be misleading them and should be avoided.

SARS has seen an increase in fraud cases involving personal income tax returns where "tax consultants” or intermediaries, having promised clients substantial tax refunds (in return for a ‘cut’ of up to 50% of the refund) submit fraudulent tax returns on behalf of the taxpayer to SARS. The activities of suspected syndicates are particularly prevalent at this time as the deadline of 22 November 2013 approaches for the 2013 Tax Season.

On 5 September 2013 SARS, with the assistance of the SAPS, conducted raids in Mpumalanga which resulted in the arrests of 28 people who had submitted fraudulent income tax returns on behalf of at least 200 individuals, on the understanding that they would keep a percentage of the fraudulent refund generated. These were private individuals who were involved in an income tax fraud syndicate, which aimed to defraud SARS – and thus the South African public – by submitting fraudulent tax claims and pocketing all or some of the money. It is possible that the arrested individuals were tax practitioners or were masquerading as such. The total amount of fraudulent claims in these cases is just over R7 million.

In these cases taxpayers were persuaded by the suspected fraudsters to hand over personal information like bank account numbers, their log-on details and passwords for eFiling so that revised tax returns could be submitted on behalf of the taxpayer and fraudulent refunds claimed. While the criminal prosecutions against the 28 individuals will be pursued before court, SARS is also in the process of taking civil actions to recover fraudulent refunds from the taxpayers involved.

The case of Mr Lusindiso "Maxwell” Mhlwatika, a tax practitioner, is currently being heard in the East London Regional Court.  Arrested in 2010, Mr Mhlwatika fraudulently claimed tax refunds for various public sector employees who he approached. He allegedly did this by submitting fraudulent tax returns on their behalf, claiming that they were entitled to tax deductions for, among other things, working abroad, working from home and having disabilities or medical expenses. He is alleged to have charged individual taxpayers between R400 and R1100 in fees, in return for which he used their eFiling usernames and passwords to submit the fraudulent returns. He faces 290 counts of fraud and 145 counts of fraudulent tax assessments for evasion. The monetary loss to the fiscus was approximately R1.5million.

On 10 October 2013, SARS and the SAPS conducted a search and seizure for evidence-gathering purposes in Bushbuckridge. The search focused on collecting both documentary and electronic evidence for an investigation into a fraudulent tax refund syndicate. The suspects are alleged to have filed fraudulent claims on behalf of taxpayers and obtained between 15% and 30% of each of the refunds claimed. It is thought that hundreds of taxpayers were conned by the syndicate into providing their taxpayer information in return for a tax refund to which they were never entitled. 

Many qualified and registered tax practitioners offer important services to taxpayers by assisting them with their tax affairs and with submitting tax returns to SARS. Unfortunately, a minority of those might be dishonest. Additionally, some individuals pretend to be tax practitioners with the intention of defrauding SARS and the unknowing taxpayer.

SARS urges taxpayers not to fall for conmen who promise them guaranteed tax refunds. The only way a refund can be "guaranteed” upfront is if fraudulent information is submitted in a tax return. This places the taxpayer at serious risk of being arrested for fraud – because taxpayers are ultimately responsible for tax returns submitted in their name, even if by third parties. 

If a taxpayer is unsure about how to submit their tax return there are a number of options available to them by SARS: 

  • Those who are registered for eFiling can make use of the Help-You-eFile function on the eFiling website. This allows them to be in direct contact with a SARS Call Centre agent while they complete their tax return online. With permission from the taxpayer, the facility enables the Call Centre agent to access the taxpayer’s eFiling browsing session at the same time as the taxpayer and to see exactly what the taxpayer is seeing.
  • Taxpayers who are not able to use eFiling or who do not feel confident in doing so can visit any SARS branch, with all the relevant documents, and a SARS official will submit their tax return electronically on their behalf and free of charge. 

While SARS understands the attraction of an offer of a tax refund for which the taxpayer does not have to do anything, the reality is that these offers are all "too good to be true” and will certainly result in difficulties for the taxpayer, as well as for the fraudster who submitted their tax return. 

Comments...

Lucia G. Bowker (Chadinha) says...
Posted 20 November 2013
Once again Fraudlent transactions causes problems for honest taxpayers. Fraud is such a big part of our country unfortunately and there are good honest taxpractioner and honest accountants and bookkeepers out there who do not engage in these activities but it once again places strain on all of us again were by because of a couple of dishonest people(fraudsters) we must all pay the price. Lucia Bowker
Michaela Oberholzer (Bahne) says...
Posted 24 October 2013
I also agree with Cynthia. But apart from this a client approached me who went to SARS to submit his return, and they did it incorrectly resulting him in owing SARS. So even there Tax payers are not guaranteed of having the correct assistance.
Johannes J. van den Berg Col. says...
Posted 19 October 2013
I agree with Cynthia's and Cornelia's comment, what interest me is the fees that taxpayers have to pay at accounting officers and other members of SAIPA just to do a job for less that 15 minutes, clients are robbed with these too high fees, I do clients taxes that are not able to travel from and to tax offices on demand, I ask a small fee without any promises, if there is a refund or not, I explain to everyone that SARS have the last say and that refunds are also conduct by SARS after assesment ,verification or audit
Cornelia E. Simpson says...
Posted 19 October 2013
I am also in agreement with Cynthia's comment. Sometimes potential clients ask me what percentage of the refund I take as a fee. They are surprised when I tell them I don't operate in that manner, because I charge a fee for the work done, whether a refund is due or not. Then I explain that the possibility of fraud is high when a practitioner operates in that manner. It therefore appears that there are still practitioners that take a "cut" of the refund as a fee.
Peter Hains says...
Posted 18 October 2013
Peter Hains. I agree with Cynthia and request Sait to take this matter up with SARS we are legitimately registered tax practitioners with SaIt and need our professional body to support us.
Elsie L. van den Bergh (Muller) says...
Posted 17 October 2013
Cynthia, no you are not the only one. All honest practioners must once again pay for the dishonesty of others. Not only does this happen in the tax word, it happens in every sector in this country of ours. It is a shame.
Cynthia R. Steyn (Uys) says...
Posted 17 October 2013
I reported this as far back as 2009 on public sector clients that requested my assistance and then I found the fraudulent prior returns the problem I have with this article is that SARS are now advising individual to be cautious of "Tax Practitioners" and rather use efiling themselves or go to a SARS Branch. This after expecting us legitimate Practitioners to register with external controlling Bodies and pay Membership fees now they erode our pool of potential income by suggesting other avenues to file their Returns. Am I the only one that does NOT agree with this type of article....
Amien N. Samsoodien Mr says...
Posted 17 October 2013
I'm glad that SARS is aware of these practices see my comment 13/01/2013

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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