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New Criminal Offences Taxpayers Can Be Charged For

Monday, 12 November 2012   (0 Comments)
Posted by: Author: Heinrich Louw
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New Criminal Offences Taxpayers Can Be Charged For

Guilty until proven innocent’ provisions retained—is this constitutional?

The Tax Administration Act No. 28 of 2011 (TAA) came into effect on 1 October 2012. The TAA makes provision for various criminal offences apart from the imposition of administrative non compliance penalties and understatement penalties . These provisions are contained in Chapter 17 (Sections 234 to 237) of the TAA.

Some of the most pertinent criminal offences relating to taxpayers in respect of administrative issues are where the taxpayer 'wilfully and without just cause' fails or neglects to:
• register in terms of a tax Act, such as for income tax or Value added Tax (VAT)
• notify SARS of a change in particulars;
• submit a return or another document;
• appoint a representative taxpayer and notify SARS of such appointment or change in appointment;
• retain records as required; or
• issue a document to a person, as required under a tax Act, such as a VAT invoice.

In respect of other administrative interactions with SARS, it is a criminal offence not to:
• supply SARS with information, documents, or things, as required;
• answer fully or truly any questions posed by a SARS official;
• take an oath or make a solemn declaration, as required, such as at an official enquiry;
• attend and give evidence;
• comply with a directive or instruction issued by SARS; or
• give assistance to SARS to conduct an audit or criminal investigation at the taxpayer's premises.

Under common law, fraud is defined as the intentional making of an unlawful misrepresentation that actually causes or potentially can cause another person to act to his or her detriment. Most cases of tax fraud would probably fall within the scope of this definition.

However, the TAA provides specifically for certain fraud-like acts to constitute statutory crimes. These include the wilful submission of a false certificate or statement in respect of returns or financial statements or accounts. It also includes the wilful issue of an erroneous, incomplete, or false document that is required to be issued under a tax Act (such as a VAT invoice).

The crimes mentioned thus far carry a penalty of a fine or maximum imprisonment of two years. Staying in the realm of fraud, Chapter 17 also contains Section 235, which specifically deals with tax evasion and obtaining undue refunds. The section is virtually the same as its predecessor, Section 104 of the Income Tax Act No. 58 of 1962 (ITA). Section 235 of the TAA provides that it is a criminal offence for a person, with the intent to evade tax or assist another person to evade tax or obtain an undue refund, to:

• make a false statement in a return or document, or sign a return or document containing such a false statement, without reasonable grounds for believing the statement to be true;
• give a false answer to a request for information from SARS;
• prepare, maintain or authorise the preparation or maintenance of false books of account or other records, or falsified or authorises the falsification of books of account or other records;
• make use of, or authorise the use of, fraud or contrivance; or
• make any false statement for the purposes of obtaining any refund of or exemption from tax.

The penalty in respect of such a crime is a fine or imprisonment of up to five years.

Section 235(2) of the TAA contains a so-called 'reverse onus' (the same as Section 104(2) of the ITA). It essentially provides that where a person is accused of making a false statement (as discussed above), that person will be regarded as guilty unless that person can prove that there is a reasonable possibility that he or she was ignorant of the falseness of the statement, and that the ignorance was not due to negligence on his or her part.

This provision stands in direct contrast to Section 35(3)(h) of the Constitution, which specifically guarantees an accused person to be presumed innocent as part of his or her right to a fair trial.

It is alarming to note that SARS has decided to retain the reverse onus provision in the context of our Constitutional dispensation. This provision is sure not to go unchallenged in court.

Source: By Heinrich Louw (Taxbreaks)



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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