What does the Tax Administration Act mean for you?

In the last quarter of 2012, a new act was added to the already heavily loaded tax laws in South Africa. The Tax Administration Act, implemented in October 2012 (after being proglumated in July 2011, and later amended in December 2012) gives more control to SARS in terms of effecting penalties, not only for late submission, which has been the norm for many years, but for a variety of other issues that might arise with any one individual tax return.

 

In the past, that is, the days before the Tax Administration Act, SARS had the ability to impose fines of up to 200% on taxpayers due to under-paying, major mistakes or outright failure to submit. In most cases, however, these fees were waived if the mistakes could be proven to have been committed unintentionally. Mostly, the only fines that would be dealt out by SARS were late fees, expect of course in serious cases of fraud and/or negligence.

 

Under the TAA, however, the increments of payment fines has been set out according to a fixed system based on two major factors: taxpayer behavior and severity of the act (the act being failure to comply with SARS policies in any number of ways.

 

For instance, in a standard case (a case involving a first time offender) who has ‘ substantially understated’ the values on their tax returns will be charged a 25% fine. A repeat offender of the same offence will pay 50%. Also, if the taxpayer in question fully and voluntarily discloses all information after being called for an audit, the fine will be reduced to 5%, and if they disclose fully before being called for an audit, the fine will be reduced to 100%.

 

This example is of a simple case of under calculating values on the tax forms, and there are various other offences that are affected by the TAA changes, many of which are more serious, but in most cases, the reduction in fines for voluntary disclosure before and after the audit process will stand (at least partially).

 

The point is this: simply do everything in your power to ensure that your SARS tax forms are filled out correctly and promptly. After all, since there is no fixed method of selecting targets for the SARS audits, you will always run the risk of incurring penalties if you do not comply fully.

 

While the TAA has tightened SARS’ grip on the South African tax industry, if for some reason you do happen to make a mistake or involuntarily slip up, the Act does allow for disclosure and grace periods that will stop you from being fined too harshly.

 

Written By: Wesley Geyer

Creative Writer for ATKA SA