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Sars is seeking to criminalise mistakes

Doesn’t believe taxpayers can make honest errors.
‘Wilful intent’ is hard to prove, which makes ‘innocent until proven guilty’ a rather bothersome inconvenience that Sars wishes to do away with. Image: Supplied

In the preamble to the latest Tax Administration Bill, the South African Revenue Service (Sars) indicates that it proposes to “remove the requirement of intent from certain criminal offences”.

In what has become Sars’s attempt at a “tough stance” to scare taxpayers into compliance, it has taken a blunt tool to remove a higher burden of proof that an action – or an omission – had criminal intent.

Sars has already decided that any action or omission was “wilfully done”, and is therefore criminal. So why should it waste time in trying to determine this?

It seems that in Sars’s book, taxpayers cannot make an honest error (naturally this doesn’t apply to Sars’s own staff).

Read: Sars versus taxpayers

Bowmans partner Patricia Williams explains: “Sars wants to remove the requirement that the relevant action must have been done ‘wilfully’. This removes the requirement of criminal intent before the action is considered a crime.”

Burden of evidence

Sars has in the past attempted to “utilise the criminal offence provisions to extract funds from people”. However, to be successful, Sars had to clear the ‘wilful intent’ hurdle. This was obviously placing too high a degree of skilfulness on Sars’s auditors; after all, ‘wilful intent’ requires a heavier burden of evidence.

Says Williams: “Criminal intent already encompasses dolus eventualis – that is, foreseeing the reasonable possibility of an outcome and reconciling yourself to that. In the circumstances, gross negligence would already arguably meet the standard of something ‘wilfully’ done. What Sars is seeking to do is to criminalise mistakes.”

Many frustrated taxpayers and tax practitioners complain that Sars treats them like criminals. Well, here is the proof.

Sars intends excising ‘wilful intent’ from:

  • Paragraph 30 (employees’ tax offences) of the Fourth Schedule to the Income Tax Act (TAA);
  • Section 58 (offences in regard to compliance) of the Value-Added Tax Act; and
  • Section 234 of the Tax Administration Act.

The amendment to Section 234 of the TAA now changes an error that can be made by anyone into a criminal act, such as: the failure to notify Sars of a postal address, a physical address, banking particulars used for transactions with Sars, an electronic address used for communication with Sars, or such other details as the commissioner may require by public notice.

It is also apparent that Sars expects all taxpayers to read their public notices, even those without access to the internet or newspapers.

Read: Sars abuses wide powers of debt recovery

Further, Section 234 provides that Sars may register and allocate a taxpayer reference number to a person who is not registered. Woe betide the person who doesn’t know this, as not using this number in any communication with Sars will turn you into a criminal.

In the Draft Memorandum on the objects of the Tax Administration Laws Amendment Bill, Sars reasons that using the term “wilfully” in respect of a statutory crime is not correct, and that it is not possible to “wilfully” neglect something, and that failing to do something required by the Act could be “problematic”.

Intent

Williams is of the view that: “This is patently wrong. One can purposefully fail to submit one’s tax return, or purposefully fail to pay one’s taxes. This looks like Sars is misstating the position, in order to make the proposed [unfair] amendment seem more reasonable.”

The National Prosecuting Authority (NPA) is of the view “that the current wording relating to criminal offences substantially undermines the ability of Sars to ensure compliance based on the objective standard expected of the reasonable person”.

“Consequently,” it says, “this may hamper the criminal prosecution of non-compliant taxpayers by the NPA in seeking to prove the elements of the crime.”

Williams is surprised: “Since when is it justifiable to remove certain elements of a crime in order to make it easier to prosecute?”

Read: Sars should be reminded of its constitutional duty

Is it possible that the NPA, which cannot point to a successful record in making powerful criminals account for their crimes, realises that it is not competent to pull off an ‘Al Capone’ tax arrest without removing ‘wilful intent’?

As for Sars, do its problems stem from the term ‘wilful intent’ scuppering its attempts at prosecuting the big boys – or from its lack of skills, inefficiency, and having been hollowed out by state capture?

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Dear Sars

Your intent to criminalise tax mistakes bears reference.

There is a difference between an error and a mistake. What sets apart the former from the latter is timing.
An error is a discrepancy that when made, a person is not aware of until much later when figures do not balance or when information asymmetry is not achieved.
A mistake is a discrepancy that when made, you know immediately and corrective efforts are subsequently made right that instance.

Primary Outcome:
An error cannot carry any criminal intent.

Recommendation:
Rather refine your skills better in chasing after accountants-turned-chefs in the corporate field as well as the vast majority of officials in certain political parties, two in particular.

Supplementary note:
Your affinity to the hard earned money of individuals/corporates and your use of fear is progressively manifesting into a system we will rebel against one day! The blood of the poor will be on your hands as well as the hands of all corrupt officials who claim they are for the people.

Sincerely

King Khan

Thank you. I am an English speaker but did not know the difference between error and mistake. I have never even thought that they were different.

Depends on who you vote for and which ANC Faction you support

The same analogy applies to our competent Government

They don’t steal our tax money, they just borrow it without asking and squander it on flashy cars and salaries

In Socialist China, the people get given 20c to survive. In our modern day democracy we as capitalists earn R1 and the thieves take 80c leaving us with 20c

We live in a fools paradise. The ANC are masters at stealing. There track record the past 25 years is evidence enough

Where has SARS been when there is CORRUPTION in Government institutions?

Surely when an entity gains monetarily from fraud/corruption, funds show up somewhere in bank accounts? new luxury houses, new sports cars, new helicopters, new planes, expensive overseas holidays?

Does SARS not receive notice anymore when you purchase those luxury items?

Does this draft law apply to SARSs executive and management when they omit to deal with the tax affairs of ANCcadres?

The anc is has played it hand and they have made things clear.

There are two types of people in South Africa, Un-Prosecutable Criminals and Prosecurable Law Abiding Citizens.

R700,000,000,000.00 in stolen public funds needs to be taxed upon and recovered from Chancellor House, as well as the employees and volunteers who participated in the events need to be taken to court and persecuted. Together with life style audits with public Naming and Shaming.

Up until that they comes SARS can go get stuffed, they have just become another branch of the corrupt and cancerous anc.

Law abiding citizens are considered to be criminals under a cleptocratic regime.

As long as errors and mistakes by SARS employees are then actionable with fines and/or prison time as well…

I so agree with this point. I know employees are incentivized for additional taxes assessed. They deliberately follow dubious procedures and have no sanction when after 3 years their shenanigans are reversed.

And when I try and change addresses on the efiling system and it never saves?

Look SARS I am all for collecting taxes and do love efiling. Also your call centre has had willing helpful folk the last few times.

I want to teach my kids how to register a business (no more cc available). Then I want to get them a tax number. Then because their student income and pocket money is below all thresholds I want them to submit tax returns and have zero taxes.

Small problem
1. CIPC has an annual fee
2. SARS business owner has to pay UIF
3. Too scared we make a mistake with business tax and paye and get fined

All the pocket money and few hundred rand for random bits of work evaporates.

Sooo now how do I teach the kids with a real life example (apparently Estonia does this)

Rather equip your kids to be citizens of the whole world, not just the third world. Give them an education.

And teaching someone finances and business administration isn’t the right education?

The business opportunities for educated folk in 3rd world are much higher than elsewhere.

Although perhaps earning a salary elsewhere could be better?

Sorry Paul, I am with Gina on this one. An education is important and the cornerstone of development, but knowing how to deal with money and people is a skill that most institutions fail to teach children properly. Entrepreneurs create jobs which we desperately need.

@GinaSchroeder

“The business opportunities for educated folk in 3rd world are much higher than elsewhere.”

That is true to some extent, but one has to then also consider the risks in the 3rd world when mafia’s, I mean political parties like the ANC or ZANU-PF threaten to take away property rights, threaten to make you a criminal for a genuine mistake on your tax filing. Not to mention all the threatening taxes and exchange controls.

It’s worth taking a look at both sides of the coin in all instances and that goes for both sides of the ocean as well.

Just look at the 1st world countries and the millions of US Dollar millionaires. They would have never made the money or accumulated the wealth they did in places like the US if they had tried to do it in South Africa, Zimbabwe or almost any other 3rd world country.

Just look at Elon Musk. We had numerous companies in South Africa a decade or two ago building satellites and I see none of those companies competing with SpaceX.

Everything should be look at in full and within the context that is applicable.

Well said.

The third world want you to take all the risks and then tax your profits and leave you with crumbs for all your effort and risk. Then they use the confiscated wealth to buy expensive imported cars and pay for blue light brigades to show the world how important they are. That is why Africa cannot progress and why inequality increases.

Sorry – a bit cryptic. For sure teaching your kids to be financially aware in a broad sense is excellent but how to open a business in a 3rd world country with its local flexible “rules” is wasted IMHO. Look at the ease of doing business in say, NZ and you will see what I mean. I’m going through opening a bank account and getting VAT registration for an SA business now and it is suicide inducing. Absolute Dunning Kruger meets cargo cult madness.

Gina, Estonia is a really good choice. Best of luck.

My SA company that only does work offshore will within a short period of time not repatriate any money to SA any longer.

An offshore company will now handle the business and the money will stay offshore.

This has been planned for sometime now as it became obvious that the few that still has something will be fleeced until nothing is left.

If no return is due its difficult to make a mistake.

So the only “willful intent” here is for the company to close and for a new company to operate from a more suitable jurisdiction.

Mmmm

Careful : what you describe ticks all the boxes for criminal tax evasion.

Unless that offshore company and its bank account is hidden inside a jurisdiction with air-gapped secrecy, SARS can detect you in a flash using FATCA. There is not much point to generating money you cannot access or use?

But I get your sentiment

….remember the ponzi 13 billion crash of 2009

Dean Rees, 40 And family fled to Switzerland

Barry Tannenbaum And family fled to Australia

FATCA doesn’t seem to have worked on these two living the lives of Riley

Or am I mistaken and both are in RSA awaiting trial?

Leah, there’s a few ex-Indians and some of their entourage now in Dubai….

@Johan-Buys: Shame, still defending the ANC thugs and that legalized theft called tax are you ?

This is a prime example of Stockholm Syndrome, where the inability to process the unbelievable horrendous machinations of that entity known as government which has in effect declared war on its citizens and holds you hostage to a system that is so corrupt so as to befuddle the victim in a perpetual state of cognitive dissonance.

Right to the last day.

I can’t see that setting up operations in a foreign jurisdiction for money earned outside SA can amount to criminal evasion. A taxpayer is entitled to arrange their affairs to minimise tax.

TaxBusta:

There are many angles to all of this but at its core is that south african tax residents are taxed in SA on their global income. That global income has a very wide net – controlled foreign entities are in the net, even many trusts. Control has many meanings and deemings including ruling with a letter of wishes. (Trust distributions are taxed here any event, I mean that trust income can be taxed here as if it was not sitting in some postbox in a tax haven). If you do not have an objectively viewed arms-length relationship, it will basically be up to you to prove that the income of that foreign company or trust is not yours in SA. If the company essentially earns its money from effort of yours and is managed by you, you are CERTAINLY going to be asking for leniency asseblief your honor,

Irrelevent if set up offshore. If you’re SA tax resident and you’re controlling it it is SAn and you need to pay tax here.

If you want to stop paying tax in SA, stop being an SA tax resident. You can’t live here though, but you can visit.

This is how the ANC deals with the criminals in its own ranks? By making everyone else a criminal?

Double standards deluxe ANC style. Criminalize the small businessman who cannot afford a Big 4 firm to prepare his tax return and makes some mistakes while teh ruling clique keeps stealing the country broke.

Were the Guptas tax returns checked? Did they pay the exit tax when they fled to Dubai with their billions?

Mr Kieswetter-as accountant in chief for the gangsters in the ANC must realize that taxpayers have had enough and that he lacks any credibility.Mauritius has a tax rate of 15%-between that and our 45%( on less than USD 100k) a lot of flights can be paid for and a lot of safety and security bought…even in the hopeless continent.

Interesting how a key bit of the explanation for the change is left out, which makes it clear that SARS and the NPA want to go after *unreasonable* mistakes. Changes the whole thrust of the story and its clickbait headline. See for yourself.

“Furthermore, whereas the test for intention is subjective, the test for negligence is objective. In other words, in the latter instance the person’s conduct must be measured against the standard of a reasonable person.

The current wording of this section requires the State to prove that the conduct was “wilful and without just cause”. This is purely subjective and there can be no reference to what a reasonable person would have done in the circumstances.“

Not one of the decisions made by the woefully inept NCCC meet the standards of those that would be made by a “reasonable person”. Those desicions are now destroying our livelihood and will soon rob us of our pensions and other savings. But you feel comfortable a few state employees, who are incentivised to find mistakes on your return, are “reasonable people”? You must be one of the authors of this criminal piece of intended legislation.

This Tax Administration Bill is clearly draconian and in breach of the Constitution. The mere fact that SARS had the impudence to draft and table it proves beyond doubt that its officials either (i) consider themselves completely above the law, or (ii) are hopelessly incompetent. The first alternative is the scarier one.

The more difficult and intimidating it becomes to deal with SARS the more skelm we will become.

SARS is becoming increasingly desperate. Wait until the end of August, when the provisional returns are in, SARS. You ain’t seen nothing yet. Your income is going to collapse completely.

at this stage few things would give me more pleasure.So heartily and completely sick of what is going down in our country.

This reeks of desperation.

SARS needs to amp up its aggression, because it introduces a level of taxation that far exceeds that of most other countries. South Africans are now one of the most heavily taxed people in the world. The public can see that our taxes have reached level that could be considered immoral. To the extent, that we have effectively become slaves to a corrupt, brutal and greedy regime.

Prime example of a a course of action that required a rapier’s edge has been substituted with a sledgehammer instead.

Heavy-handed, clumsy, and will do more damage than good.

Moves like this serve one purpose only.

They just accelerate and reinforce existing trends. Alienate even further, an ever shrinking tax base.

Is it only hard working individuals that see this – are the ANC really that oblivious? Add this to an inevitable increase on all taxes (Hotel occupancy, Amusement etc).

We are becoming a true basket case.

@SARS , @KIESWETTER – Baby Steps… first you need to deal with the rot in this country and correct their TAX EVASION.

Still no comment from SARS about the non-tax-paying taxi-industry? Until such time as one of the biggest industries becomes a tax-payer I encourage everyone to not pay tax. SARS is happy to criminalize actual payers yet ignore an entire industry of non-payers!

Careful. You could have Henry questioning your ‘moral compass’.
pay as little tax as possible, avoid, duck and dive, whatever route has the least chance of accountability.

Great news! So SARS will be criminilised for their mistakes as well. Fines to be apportioned to tax payers. If this can be the case, we will gladly accept.

I’m guessing that nearly all of SA’s individual taxpayers, to a man/woman, would be eligible for emigration, to where many other ex-SA taxpayers now reside. SARS should be treating taxpayers with respect,indeed like gold, because where will they source their taxes from if this core group ups and goes? I think that they want to remain in SA, but what is the incentive?

goodbye sars.klaar met julle.

I thought it was already an offence to cheat on your tax return. if you make a mistake they will need to prove it was intentional.you cannot be prosecuted for an error that was just that.
What if your bank leaves off an interest amount? Who will be prosecuted?

This is the Brave New South Africa, my friend.
YOU will be prosecuted, and JZ, Ace and their cronies will be driving their Maseratis, Bentlys and Rangr Rover Evoques without a care in the world.

We all know how communists roll. You force your way by legislation therefore making what you want, law.

TV Licences?

Rediculous Amendment upon Amendment of regulations right now?

My friends may not visit me at home but we can have dinner at a restaurant?

Then you have Sitting Judges pulling Stalingrad moves at Zondo Commission?

In SA one is safe from prosecution if as one is stealing, raping and murdering. However, make a mistake on ones tax returns and the full might of the law will be quickly and efficiently applied to one.

The reason for this is obvious tax errors could effect the amount of money for the politicians to steal or use to live an abnormally luxurious lifestyle. Whilst normal theft, rape and murder only affect the countries citizens i.e. the ones not guarded by VIP protection.

I wonder if there is not a possibility of laying a charge of extortion against SARS. What they really are doing is frightening tax payers by threatening criminal prosecution into paying whatever they demand.

Multi billion Rand taxi business still got you and your anc masters by the tochas, SARS?

This article is very vague, when will this become law? Will it apply retroactively? What happens if your employer makes a mistake on your PAYE or UIF? Does this mean that you can become a criminal even if you have paid all your taxes, just because you havent updated your address?

Secondly, if you can now be considered a criminal for not updating your address on your sars profile, then 60% of the working public will be considered criminals?

Why can’t I find any details about this elsewhere on the internet?

End of comments.

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