Tax evaders could pay up to 200% of their taxable income in penalties warns Willem Oberholzer, tax partner at Grant Thornton Pretoria
We are not expecting any huge surprises in terms of further taxation from this year’s Budget Speech; what we are expecting, however, is that taxpayers will be expected to take on more of an administrative tax burden when new legislation forces individuals to be extra vigilant and responsible in order to avoid new burdensome penalties for non-compliance.
With the introduction of Tax Administration Act (TAA) on 1 October 2012, mandatory penalties will now be levied on any individuals who may be knowingly declaring below expected revenues or perhaps mistakenly claiming for invalid expenses. These penalties will vary from between 5% and 200% depending on a number of important factors.
The TAA states that if there are any penalties and interests accruing for an individual as a result of late filing, non-submission, or incorrect claiming, a compulsory penalty has been declared.
Voluntary disclosure by tax payers will be given amnesty at this stage, but if the admission of guilt is accompanied by a written audit letter, evaders could expect to pay anything between 5% and 75% of their taxable income as a penalty, depending on the degree of avoidance in question. Worst case scenarios will see penalties of up to 200% of an individual’s taxable income being imposed on serious offenders who choose not to declare appropriately and who are deemed to be negligible on all accounts.
It is important for high income earners to ensure that due care is taken to reduce the penalty risk exposure. In order to avoid penalties on under declaration of income when completing provisional tax returns, an individuals must keep an up to date record of income and expenses incurred, at all times – not just at year end.
Regular discussions with your tax advisors will also help to ensure that personal accounting records are accurate and well maintained at all times. Overall it’s about taking greater care to complete your income tax returns so that any variances, omitted information or errors which are identified can be declared voluntarily to SARS, thereby ensuring that penalties of any kind are reduced to the absolute minimum.
The ‘golden goose’ refers to the small minority of taxpayers (roughly 2.2%) who earn more than R1-million annually, and who contribute in excess of R71-billion (over 25%) of personal tax income to sustain the rest of the country and keep the wheels of the state turning.