Tax evasion: beware

2009-09-09 00:00

THROUGHOUT the world, revenue administrations are grappling with falling revenues from income tax, consumer taxes and trade taxes.

No one can collect revenue which is not there or not due, but in every economy there exists a revenue gap of varying degrees between what is paid and what should ideally be paid. Closing this gap has received ongoing attention over the years, but given the revenue reality we currently face (we are already R19 billion below target for the first quarter of the fiscal year) this must now become a priority focus for SARS.

Tax morality is a cornerstone of any nation’s developmental agenda and is a fundamental responsibility of every participant in an economy.

We are encouraged that most individuals, businesses and traders continue to be compliant and contribute to the development of our country.

In fact, our tax register has increased at an average of 10% a year over the past decade, pointing to a steady growth in the culture of compliance in this country. Companies, too, have come to the party, with more and more sharing the view that corporate tax planning cannot and should not occur in isolation from an organisation’s broader social commitment policies and agenda.

However, there are still those who do not see tax evasion as immoral. Tax evasion is a crime against us all. Its victims are the young and the old, the helpless and the weak, the sick and the disabled. Its victims are you and I who pay our fair share and meet our obligations.

By robbing the fiscus of money due to it, tax cheats constrain the government’s ability to provide for all our citizens.

Our compliance model has always comprised three strands — education, service and enforcement. The modernisation drive at SARS is all about improving efficiency and enhancing service. The simplification of the tax return form and the introduction of various innovations in the past few years are intended to free up capacity, while creating convenience for taxpayers.

Nonetheless, transforming a culture from evasion to compliance depends on enforcement and legal recourse, including penalties and fines. The consistent enforcement of these is an important part of the story of influencing individual behaviour in the public interest.

This year SARS will increase its focus on detecting and punishing noncompliance. SARS will intensify its risk management and audit capacity, including the employment of 1 000 additional auditors with specialised skills in finance, banking and other key sectors. SARS will expand its use of third party data from employers, financial institutions, medical and pension funds and others to ensure taxpayers pay their dues.

SARS will intensify its focus on high-net worth individuals and their tax behaviour and will unravel tax schemes aimed at aggressive tax avoidance. It will redirect resources to its enforcement capability and will be targeting those with outstanding returns and outstanding payments, and those who should be registered for tax but are not.

Improvements in SARS’ PAYE process have already identified 600 000 employees who should be registered for tax but are not. And nearly 7000 employers who failed to submit their PAYE reconciliations to SARS on time have already received penalty letters amounting to some R730 million. In addition, 4 000 other employers who have not paid over taxes withheld from employees will shortly be issued with summonses.

During this tax season, SARS will be clamping down on non-compliance, including late submissions. Tax season, which launched on July 1, provides 12 weeks for the submission of manual returns and 21 weeks for the submission of electronic returns. There should be no excuse for late submission.

• Oupa Magashula is the Commissioner of the South African Revenue Service (SARS).

 

TAX FACTS

 

• In 1999 there were 4,5 million active individual taxpayers and one million companies. This has grown to 5,35 million individual taxpayers and 1,65 million companies this year.

• For the 2008/09 tax year, R10,5 billion worth of tax relief was granted.

• In 1999 state debt was 49,9% of GDP. In 2008/09 it went down to 22,4%.

• Revenue collection has increased in the past decade from R184,8 billion collected in 1998/99 to R625,1 billion in 2008/09.

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