Criminal proceedings against non-compliant taxpayers!


Geo Kilian | Tax Attorney | Tax Consulting SA | mail me |

In recent weeks we have seen first-hand the powers of SARS in holding taxpayers criminally liable where their tax affairs are not in order.

What is important to note is that SARS has always had the authority through legislation to institute criminal proceedings against non-compliant taxpayers. However, prior the recent surge in criminal charges brought against non-compliant taxpayers, we have not really seen this type of enforcement from SARS. While it is common knowledge that the Revenue Authority has now initiated criminal proceedings against a host of delinquent taxpayers, it begs the question: what has changed?

SARS probably hit rock-bottom during 2018, which coincided with the Nugent Commission of Inquiry into the Tax Administration and Governance at SARS. The Nugent Commission published its Final Report on 11 December 2018, which revealed that the institutions resources and values have been hollowed out over the course of the previous administration and that taxpayer morality is concerningly low. The Final Report recommended a total revamp of the Revenue Authority, beginning at the upper tiers of management and working its way down to the finer mechanisms that drove the SARS machine.

When Edward Kieswetter was appointed as the Commissioner, he was given the task of reformation. During 2019, using the findings and recommendations of the Nugent Report as a guide, Kieswetter went to work on the internal structures of SARS. The wheels turned slowly but based on SARS’ media releases and information in the public domain, the institution was making a steady recovery, prioritising enforcement, and re-establishing its deterrence factor.

Lockdown was no deterrent

Since the inception of the hard lockdown restrictions in March 2020, there were various speculations about the extent the fiscus was being depleted, this on the back of the economy coming to a halt and the ban on alcohol and cigarettes being introduced. Subsequently, SARS failed to make their annual budget, which created a stir among those who were secretly rooting for their revival.

SARS still allowed for many graces during this time. With tax relief measures like the extension of the deferral of employees’ tax liabilities, the temporary waiving of penalties for tax debt, or the deferral of excise duties extended to businesses across the alcohol sectors, SARS offered numerous helplines to businesses who were taking strain.

While the global economy was reeling and battling to get everything back on track, SARS quietly continued to perfect its capacity to manage information and to enhance its systems to aid in the pursuit of correcting non-compliance and prosecuting tax evasion, frequently sending out warnings to media that they are preparing to make good on their promises.

Some still chose to run the gauntlet

Despite SARS’ constant warnings that it will make life difficult for non-compliant taxpayers, many chose not to heed them. Taxpayers who consciously decide to flout their tax obligations often do so after they have weighed up the benefit of doing so with the risk of getting caught. Seemingly, numerous taxpayers still doubted SARS’ ability to detect and prosecute them, and they decided not to change their behaviour. Clearly, however, we are not dealing with the same institution of the previous era.

SARS realised that taxpayer morality will not improve unless the tax base actually sees the consequences of non-compliance. As suggested in the Nugent Report, SARS joined forces with the National Prosecuting Authority (NPA) and made use of Special Tax Unit prosecutors to progress their efforts. In addition, it pushed a legislative change that made it simpler for the NPA to prosecute taxpayers for tax offences. The product of these initiatives, among others, is the current surge in criminal proceedings.

Criminal proceedings

Where a taxpayer faces criminal prosecution, they not only face the

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Read the full article by Geo Kilian, Tax Attorney, Tax Consulting SAas well as a host of other topical management articles written by professionals, consultants and academics in the October/November 2021 edition of BusinessBrief.

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