“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” (Denis Healey, former British prime minister)

Section 234 in Chapter 17 of the Tax Administration Act (TAA) sets out a list of criminal tax offences. If prosecuted and convicted of a tax criminal offence, taxpayers will – at the least – be subjected to a substantial fine and may even face the maximum penalty of imprisonment for up to two years. There are also other harsh consequences of a criminal conviction under section 234, such as a negative impact on the eligibility of individuals to hold certain positions and to emigrate from South Africa, as well as reputational damage and a loss of both shareholder value and stakeholder trust for corporate taxpayers.

These tax criminal offences range from serious offences, such as intentional tax evasion and frustrating SARS in carrying out its duties, to relatively minor breaches, such as failing to notify SARS of a change in registered particulars.

Common tax criminal offences

• Not registering for tax purposes to evade paying taxes due.
• Not submitting returns to SARS as and when required to evade paying taxes.
• Not truthfully responding to SARS’ questions.
• Not declaring income to evade paying tax on that income.
• Lying about expenses, like business mileage or medical contributions, to reduce tax payable or obtain an undue refund.
• Submitting fraudulent invoices to reduce Income Tax and VAT payable or obtain fraudulent refunds.
• Employers deducting tax from employees (PAYE) and never paying it over to SARS.
• Vendors, whether registered for VAT or not, charging VAT and never paying it over to SARS.
• Not notifying SARS of a change in registered particulars.
• Not retaining records as required under the TAA.
  
  
• Issuing an erroneous, incomplete or false document required to be issued under a tax Act.
  
  
• Neglecting to disclose to SARS any material facts which should have been disclosed.
• Obstructing SARS officials in doing their duties.

How SARS views taxpayer behaviour

While taxpayers were previously merely penalised for human errors and simple mistakes – which are common given the complex tax processes and strict deadlines – a taxpayer can now be found guilty of an offence without SARS having to show that the taxpayer wilfully, deliberately and knowingly committed the offence.

This means even inadvertent or administrative errors can be penalised with a maximum penalty and that a substantially expanded range of taxpayer behaviours – and a greater number of taxpayers – are now open to criminal sanctions.

How to avoid committing tax criminal offences

SARS notes that among the steps that a reasonable person may take to avoid committing tax criminal offences is “employing an accountant, tax practitioner, or other tax professional to complete returns, or from whom to obtain advice before completing a return with entries that are not understood or adopting a position with tax implications.”

Be sure to choose a specialist who is appropriately qualified and experienced, as well as a member of a professional controlling body that enforces strict standards, such as SAICA (South African Institute of Chartered Accountants).

Advice from a professional can ensure that an appropriate tax strategy is formulated to proactively manage tax risk in the long term, which will save time and money and avoid expensive tax mistakes while keeping in line with the ever-changing tax obligations.