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Civil vs. Criminal Investigations. A Taxpayer’s Right Not To Give Self-Incriminating Evidence

Wednesday, 04 March 2009   (0 Comments)
Posted by: Author: Kerry Watkin
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Civil vs. Criminal Investigations . A Taxpayer’s Right Not To Give Self-Incriminating Evidence

Last year ended on a controversial note with significant changes to the system for provisional tax. These changes caused a huge outcry from taxpayers and tax practitioners.Parliament last year approved an important change to the provisional tax payments process and the imposition of additional tax on underestimates relating to these payments.Until now, additional tax has been imposed if the estimate for the second period is not equal to at least.

Taxpayers should be mindful of SARS’ rights to conduct criminal investigations parallel to civil audits. In this regard, it is not unusual for SARS to employ SAPS (South African Police Service) fraud investigators to assist in gathering self-incriminating and other evidence against wayward taxpayers who have allegedly defrauded the fiscus. This fraud investigation occurs contemporaneously to the civil tax liability investigation, oftentimes without the taxpayer knowing that a criminal investigation exists.

Strategically this is effective but SARS must also adhere to the same laws they seek to impose. It is therefore prudent for taxpayers to be aware of their rights at the commencement of any SARS investigation.The secrecy provision of the Income Tax Act, read with Section 35(3)(h) and (j) of the Constitution of the Republic of South Africa, entrenches the right to a fair trial and includes the right to remain silent and not to be compelled to give self-incriminating evidence.

Clear constitutional direction, encapsulated in the Bill of Rights, has been given.  If a person is compelled to give self-incriminating evidence, then that evidence may not be used in a fair trial against that person. If the evidence is obtained from another party (excluding an attorney where the attorney-client privilege applies and can be relied upon), the evidence is not self-incriminating.

Any SARS investigation, once underway, is effectively the equivalent of a written interrogation. The taxpayer’s answers to written questions are tantamount to a written interrogation where the taxpayer is compelled to furnish information. Should any of the answers be self-incriminating, the evidence thus obtained cannot be used against the taxpayer in criminal proceedings.

In terms of Section 35 of the Constitution, every arrested, accused or detained person has the right to remain silent and to be informed of this right. However, investigation of a crime does not constitute arrest and a suspect therefore does not have to be informed of his right to remain silent. The suspect may thus inadvertently make incriminatory remarks which could subsequently be used against him in a trial.

It has long been a principle of the common law that no person can be compelled to give self incriminating evidence. Accordingly, a suspect is entitled to the same fair pre-trial procedures as an arrested person and, if a suspect is deprived of the rights afforded to an arrested person, then they would be denied a fair trial.Not withstanding this, when incriminating statements are made before arrest and before the accused is even a suspect, there is no reason why the evidence may not be used by the prosecution at the trial. In these circumstances, a court will place importance on the fact that the statement was made spontaneously and without duress.

Consequently, where a taxpayer is compelled to give self-incriminating evidence, it cannot be used against him in a trial. However, where he freely makes self-incriminating statements, a taxpayer will not be able to avail himself of the Constitution. Thus, if the taxpayer is threatened with prosecution in terms of the Income Tax Act for refusing to answer any questions required by the Act, the taxpayer can rely on his constitutional right not to give self-incriminating answers. Where SARS merely wishes to determine the taxpayer’s civil liability and have undertaken not to prosecute (an undertaking which is best obtained in writing), this defence will not be available to the taxpayer.

It must be remembered that there is no obligation on SARS to press for any charges against a taxpayer that may fall within one of the criminal provisions in the tax statutes. Notwithstanding this, taxpayers should establish the parameters of a SARS investigation from the outset and ensure the administrative purpose thereof is reduced to writing by SARS, together with confirmation that no criminal investigation will be pursued. In addition, one way of preventing the taxpayer being steered into giving self-incriminating evidence voluntarily is to ensure that SARS quotes the section of the tax legislation relied upon in seeking the information, and ensure SARS confirms that the information must be given under compulsion.

Source: By Kerry Watkin (TaxTALK)



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