Tax transgressions and pitfalls

SARS is committed to stamping out tax crime in South Africa, according to Ilsa Groenewald, Associate Director for tax at the Durban office of BDO South Africa, the audit, advisory and tax firm. Here, she reviews tax morality, common transgressions, and pitfalls.

Groenewald says that SARS’s biggest challenge is to change the mindset of South African taxpayers towards paying tax. Some taxpayers may not view the tax system as fair which may result in non-compliance. She added that attitudes towards tax compliance are shaped by many factors such as social, psychological, economic and business factors.

Examples of tax evasion or crime include under-declaration of income to avoid payment of tax. Some taxpayers also overstate expenses to reduce taxes. This is of course done in a number of manners, such as inflating the amount of business kilometers travelled during a tax year.

Groenewald adds that SARS also focuses on taxpayers (such as individuals, trusts, corporates, and PBOs and NGOs) who do not submit their annual income tax returns. Certain employers, on the other hand, deduct PAYE from their employees’ but fail to pay it to SARS.

“In many cases employers apply the money to manage their cash flows. Some businesses do the same with VAT, charging 14% VAT on their goods or services and not paying this to SARS.” Certain businesses submit fraudulent or non-compliant tax invoices to SARS in an attempt to obtain undue tax reductions or even refunds.

“Individuals, including sole proprietors, are tempted to not register for income tax purposes and often rely on non-detection to avoid paying their taxes which, if discovered, could have serious consequences,” she says.

She urges taxpayers to be mindful not to get on the wrong side of SARS, and not to aid or assist in tax evasion. Knowledge of tax wrongdoings can be reported to SARS’s Fraud and Anti-Corruption Hotline on 0800 002870.

A warning sign for employees can be where your employer cannot provide you with an IRP5, reflecting your income earned and PAYE paid during a year of assessment. “You should also address significant fluctuations in your tax deductions with your employer. Businesses should be on the lookout for vendors who offer discounts if you pay cash, especially if you do not receive a tax invoice.”

Groenewald warns that identity theft has been a real threat recently.

“Always be extra careful when disclosing your personal details such as your ID number and banking details.

“Also be mindful of scams and phishing attacks that use the SARS logo. If the content does not make sense to you or seems suspicious in any way, it is best to consult your local SARS office or your tax practitioner.”

 

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