Income Tax and Other Revenue Collection

Income tax created more liars than golf ever did.1

The government of any country needs money to run the place – to build and maintain airports, railway systems, roads, hospitals, to keep a police force, army, navy and the air force. The most basic way for a government to get money is to tax its citizens, and very clever people in finance ministries around the world are always coming up with ways to impose taxes.

The Income Tax Act 1962, the Value-Added Tax (VAT) Act 1991, and nearly two dozen other statutes designed to collect revenue for the running of the country fall under the Department of the Minister of Finance, who is also the Commissioner for the South African Revenue Services. Appointed by the President, he is responsible for carrying out the provisions of the various so-called Tax Acts. The South African tax authority, SARS, has been rated as amongst the most efficient in the world. That is good news, or bad news, depending on your perspective.

One would expect these statutes2 to be liberally punctuated with provisions criminalising contraventions and failures. However, it is the Tax Administration Act 2011 which does so – as its headnote matter-of-fact announces,3 it aims ‘to provide for the effective and efficient collection of tax …’. This Act (‘TAA’) is also administered by the Commissioner.

TAA sets out comprehensive provisions concerning: the powers and duties of SARS and of the Tax Ombud; registration as a tax payer, tax liability, tax returns and records; information gathering; confidentiality of information; advance rulings; assessments; dispute resolution and the tax court; recovery of tax; interest; refunds; write offs; the various penalties; and tax practitioners and their conduct. Of course, it also stipulates the criminal aspects of non-compliance.

The provisions referred to below are to be found in Chapter 17. TAA applies to all the ‘Tax Acts’. Including itself, this means those referred to in section 4 of the South African Revenue Service Act 1997 – essentially, those two dozen referred to above. Relevant provisions from these statutes are referenced, where appropriate, in what follows.

A. Registration

  1. Any person who is obliged to register with SARS is guilty of an offence if he fails or neglects to do so (and then within the period provided for in the particular Tax Act4).5 This means:6
    • Income Tax – if your salary was more than the threshold in the particular tax year;
    • as a Provisional Tax Payer – in other words, you have earned an income but not as a salaried or wage-earning employee;
    • for VAT – if the total value of taxable supplies made by your enterprise in any given 12 month period exceeded the threshold;
    • for the Diamond Export Levy – all producers, dealers and beneficiates who trade in unpolished diamonds;
    • Donations Tax – it must be paid, by the donor, within three months of the donation; this is deemed to be property disposed of for inadequate consideration;
    • Estate Duty – paid by the executor of the deceased estate, and is charged at the rate of 20% upon the dutiable amount of the estate exceeding the threshold;
    • Dividends Tax – is levied at 15% on dividends paid by a company, to its shareholders. In practice, the company is the withholding agent and the tax is deducted from the dividend before being paid out;
    • Securities Transfer Tax – this is when a share in a company, or a member’s interest in a close corporation is transferred. For securities listed on the Johannesburg Stock Exchange, the tax (which is 0.25% of the value of the transaction) must be paid, by the selling member or participant, before the 14th of the next month. For unlisted securities, it must be paid, by the selling company, within two months after the end of the month in which the transaction occurred;
    • Skills Development Levy – This is payable by an employer whose total salary bill will exceed the threshold amount over the next 12 months. The employer must register, and the tax is a percentage of the total amount paid in salaries;
    • Transfer Duty – this is payable by the person who acquires immovable property (e.g. land, buildings), or rights to minerals or a share in a residential property, company or a share-block company. The taxation rate varies depending on the value of the transaction, and it must be paid within six months. For all practical purposes, the conveyancer attending to the registration of the transfer will pay the amount and then recover it from you;
    • Turnover Tax – this applies to micro-businesses and for them replaces the Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax systems. Such individuals or entities wishing to take advantage must register; tax is paid, on sliding scales, twice a year;
    • Capital Gains Tax – this is a tax which arises when you dispose of (certain) assets for proceeds that exceed its base cost. In effect, the taxable amount (the difference) is added to your taxable income for purposes of income tax.
  2. Once registered, it is an offence if you fail to notify SARS, within 21 business days, of any change that relates to your:
    • postal address;
    • physical address;
    • representative tax payer;7
    • banking particulars used for transactions with SARS; and
    • electronic address used for communication with SARS.8
  3. It is an offence to fail to disclose to SARS or notify it of any material facts which should have been disclosed or notified under the particular Tax Act.9 10

B. Returns11 and the submission of information

  1. It is an offence to refuse or neglect to furnish, produce or make available any information, document or thing if required to do so in terms of TAA.12

  2. Any person who:
    • fails to submit a return, or any required document, to SARS;
    • fails or neglects to retain records as required under TAA; or
    • submits any false certificate or statement to SARS,is guilty of an offence.13
  3. A person who:
    • submits a return, or other document to SARS under a forged signature;
    • uses an electronic or digital signature of another person (in an electronic communication to SARS) without that person’s consent and authority; or
    • submits to SARS a communication on behalf of another person without that person’s consent and authority,

    is guilty of an offence.14

C. Undue refunds

  1. Any person who, with intent to evade (or to assist another person to evade) tax or to obtain an undue refund under a Tax Act:
    • makes or causes or allows to be made any false statement or entry in a return or other document;15 or
    • signs a statement, return or other document so submitted without reasonable grounds for believing the same to be true;16 or
    • gives a false answer, whether orally or in writing, to a request for information made under the Act;17 or
    • prepares, maintains or authorises the preparation or maintenance of false books of account (or other records) or falsifies or authorises the falsification of books of account or other records;18 or
    • makes use of, or authorises the use of, fraud or contrivance;19 or
    • makes any false statement for the purposes of obtaining any refund of or an exemption from tax,20

    is guilty of an offence.

D. Employers and employees

  1. Any person who fails or neglects to appoint a representative taxpayer commits an offence.21

  2. It is an offence to fail to notify SARS of the appointment or change of your representative taxpayer.22

  3. If you are required under a Tax Act to issue a document to another person (for example, an IT3A to your employee) you commit a criminal offence if the document is, without just cause, erroneous, incomplete or false.23

  4. It is an offence if you fail to issue a document to a person as required under any one of the Tax Acts.24

E. SARS directives and officials

  1. If any questions are put to you by a SARS official, it is an offence not to reply or answer truly and fully.25

  2. If you are summoned to a hearing in terms of TAA, it is an offence if you fail to:
    • attend and give evidence; and
    • take an oath or make a solemn declaration.26
  3. Any person who fails to comply with a directive, or instruction issued by SARS under a Tax Act is guilty of an offence.27

  4. It is a crime to obstruct or hinder a SARS official in the discharge of his duties.28

  5. SARS may conduct audits or investigations at any premises. Any person on the premises, or its owner, can be called upon to provide facilities, to answer questions, and submit relevant material. It is an offence to refuse to give such assistance if required.29

  6. Any person who pretends to be a SARS official engaged in carrying out the provisions of TAA commits a crime.30

  7. SARS has the power to recover your tax debt from third parties – for example, if someone owes you money, whether as a debtor or it is your salary; or certain shareholders in a company which is liquidated with a tax debt, and so forth. In such circumstances, SARS can give notice to the third party to transfer assets or pay the amounts to SARS. If the third party fails to comply with the notice, he is guilty of an offence.31

F. Tax evasion

  1. Tax evasion is when a person wilfully and without just cause engages in certain conduct designed to reduce, or not pay tax, or to obtain an undue refund under a Tax Act. The following are all offences:
    • to make or cause or allow to be made any false statement or entry in a return or other document;
    • to sign a statement, return or other document so submitted without reasonable grounds for believing the same to be true;
    • to give a false answer, whether orally or in writing, to a request for information made under TAA;
    • to prepare, maintain or authorise false books of account or other records;
    • to falsify or authorise the falsification of books of account or other records;
    • to make use of, or authorise the use of fraud or contrivance; or
    • to make any false statement for the purposes of obtaining any refund of, or exemption from, tax.32
  2. Any person who dissipates his assets, or assists another person to dissipate that other person’s assets, in order to impede the collection of any taxes, penalties or interest commits a criminal offence.33

  3. If you are the withholding agent for someone’s tax, this means you are the person who, under a particular Tax Act, must withhold an amount of tax and pay it to SARS. For example, employers are ‘withholding agents’ under the Income Tax Act for the purposes of PAYE tax. It is an offence if you fail or neglect to withhold the tax, and also if you fail to pay it to SARS, as and when required under a Tax Act.34

G. Tax practitioners

  1. Every person who provides advice to another person regarding the application of any one of the Tax Acts must register with SARS as a tax practitioner and commits an offence in failing to do so.35

  2. Every person who completes or assists in completing a tax return for another person must register with SARS as a tax practitioner and commits an offence in failing to do so.36

H. Confidential information

  1. Current and former SARS officials may not disclose any information relevant to the administration of any Tax Act37 and commit an offence if they do.38

  2. If such information is disclosed in contravention of the Act, the person to whom it was disclosed commits an offence if he fails to keep it confidential.39

  3. They also commit a crime by disclosing taxpayer information to a person who is not a SARS official.40

  1. An adaptation of the quote attributed to Will Rogers, the American humourist and actor. He was reputedly one of the world’s best known celebrities in the 1930’s. 

  2. Many of which are, in themselves, monster documents – and, as to be expected, complicated and detailed. The most obvious form of taxation is income tax. 

  3. And its purpose, recorded in section 2. 

  4. Or within 21 business days of becoming so obliged if no period is prescribed. 

  5. Section 234 of TAA. 

  6. See this site for most of the references in this section. 

  7. This means the person who is responsible for paying your tax, as an agent. It includes your employer, in the case of PAYE tax, for example. 

  8. Section 23 read together with section 234 of TAA. 

  9. Note: This provision applies generally, at all times, and not just for ‘registration’ purposes. 

  10. Section 234(j) of TAA. 

  11. A ‘return’ is just a formalised report submitted to an authority as is prescribed by legislation or regulation. 

  12. Section 234 of TAA. 

  13. Section 234 of TAA. 

  14. Section 237 of TAA. 

  15. Section 235(1)(a). 

  16. Section 235(1)(a). 

  17. Section 235(1)(b). 

  18. Section 235(1)(c). 

  19. Section 235(1)(d). 

  20. Section 235(1)(e). 

  21. Section 234(b) of TAA. 

  22. Section 234(b) of TAA. 

  23. Section 234(g) of TAA. 

  24. Section 234(d) of TAA. 

  25. Section 234(h) of TAA. 

  26. Section 234(h) of TAA. 

  27. Section 234(i) of TAA. 

  28. Section 234(k) of TAA. 

  29. Section 49(1) read together with section 234(l) of TAA. 

  30. Section 234(m) of TAA. 

  31. Section 234(n) of TAA. 

  32. Section 235(1) of TAA. 

  33. Section 234(o) of TAA. 

  34. Section 234(p) of TAA. 

  35. Section 240 read together with section 234(c) of TAA. 

  36. Section 240 read together with section 234(c) of TAA. 

  37. Section 68(1) of TAA gives a comprehensive explanation of such information, ranging from personal information about SARS officials to computer programs owned by SARS. 

  38. Section 69 read together with section 236 of TAA. 

  39. Section 67(3) read with section 236. 

  40. Section 69 read together with section 236 of TAA.