You can run but you cannot hide!
23 March 2015
Posted by: Author: Erich Bell
Author: Erich Bell (SAIT Technical)
SARS’ latest advertisement entitled "Paranoia” portrays a
person who has under declared his tax liability and who now suffers from
extreme anxiety and paranoia because, he can run but he cannot hide. This
advertisement, ending with "we’re closing in on undeclared income and
overstated expenses”, stands completely in contrast with SARS’ previous campaigns
that employed a carrot-stick approach by showing how your tax changes lifes of
millions of South Africans. This change may be attributable to the new
Commissioner, Thomas Moyane, who made it clear to the whole of South Africa
that he would be clamping down on the non-compliant taxpayers in South Africa.
The fact is that irrespective of who the Commissioner of
SARS is and the advertising campaigns employed by him, the most scariest of all
is the rights afforded to SARS in terms of the Tax Administration Act (No. 28
of 2011) ("TAA”). This article will shed some light onto the provisions of the
TAA that you, as a taxpayer should be made aware of.
When can you as a
taxpayer have a good night’s rest without any fear and paranoia?
The TAA contains two parts that you should be aware of. The
first one governs when SARS may issue an assessment. Here a distinction must be
drawn between an assessment by SARS and a self-assessment by the taxpayer.
For an assessment by SARS, which applies to Income Tax at
the moment (note that the Income Tax system will soon change to a
self-assessment system as announced in the Budget Speech 2015), SARS may not
issue an assessment after three years of the date of assessment, unless
the full amount of tax actually due by you was not assessed by SARS due to
fraud, misrepresentation or non-disclosure of a material fact. In the case of
Income Tax, the "date of assessment” is the date on which SARS issues the
notice of assessment. Therefore, SARS would not be able to issue an Income Tax
assessment after three years have expired, provided that you have disclosed all
your receipts, accruals and deductions in a full and honest manner.
For self-assessments, which applies to your PAYE and VAT
returns, SARS may not issue an assessment within five years from the
date of assessment, unless SARS hasn’t collected all taxes due by you due to
fraud, intentional or negligent misrepresentation, intentional or negligent
non-disclosure of material facts or the failure to submit a return. In the case
of self-assessments, the date of assessment is the date on which the return is actually
submitted by you. It should furthermore be noted that for self-assessments, the
TAA requires the misrepresentation or non-disclosure by you to be "intentional
or negligent”. In order to determine if
you were negligent, your conduct would be measured against the conduct of a
"reasonable man” faced with similar circumstances. Due to the increased
compliance culture in South Africa, it is submitted the bench mark of a
"reasonable man” is set quite high, even though the determination is case
specific. Taxpayers may therefore struggle to argue that their lack of tax
knowledge have led to them not disclosing all facts or misrepresenting
receipts, accruals or expenses to prevent SARS from issuing further assessments
after the five years.
Whether you are dealing with an original assessment by SARS
or a self-assessment, as soon as you committed the fraud, misrepresentation or
did not disclose material facts through your return, SARS will issue an
additional assessment to ensure that it collects all taxes lawfully due to it.
It is important to note that, in terms of section 171 of the TAA, SARS has
fifteen years from the date of assessment to institute proceedings to recover a
tax debt due to it.
The second part that may be of interest to you comes into
operation as soon as you have a tax liability that you are not settling with
SARS. SARS then has various tools at its disposal to collect the tax debt,
including appointing your employer or bank through an agency appointment which
would require them to deduct amounts from your salary or bank account and to
pay it directly over to SARS. Furthermore, SARS may also apply for a civil
judgement to obtain a liquid debt from you in order to settle your outstanding
From the above it is apparent that the best way to prevent
fear and paranoia is to be honest the first time round with SARS when declaring
your income and expenses on your return. In doing so you can have a good
night’s rest from the day of submission of your return.
What to do if you are
tired of running?
From past experience, taxpayers generally make use of two
tactics. They either submit an incorrect return and pray for 15 years on end
for SARS not to select them for audit or they come clean via the Voluntary
Disclosure Programme ("VDP”). The latter is, however, the preferred method
(that is to say if you are not a believer in miracles).
If you’ve already come clean with your tax affairs and you
are unable to pay, then it is advised to apply for an instalment payment
agreement in terms of section 167 of the TAA or to apply for a compromise in
terms of section 200 of the TAA.
From the above, it is clear that the TAA affords extensive
powers to SARS when it comes to assessing and collecting tax. For me,
personally, the best way to ensure a good night’s rest, every night, is to do
things right from the start. That means ensuring that you make use of the
services of a registered SAIT tax professional. If, however, you are
non-compliant and you are tired of running, it is advised that you ask your
SAIT tax professional to assist you in coming clean through the VDP. SAIT tax
professionals are also experts in arranging payment terms with SARS and it is
highly recommended that you make use of one when you’re struggling to pay SARS.