How to be a tax whistleblower

Johannesburg - The payoff for ratting out tax avoiders has never been sweeter. Apart from all the moral stature stuff, you may also help to save yourself some future tax pain.

Finance Minister Pravin Gordhan said recently that income tax would be hiked in the next budget - if additional tax revenue is not found in the next couple of months.

Government is facing a squeeze; in the 2009/10 fiscal year its tax income was almost R70bn less than budgeted for, while state spending ballooned to keep the economy afloat.

Getting everyone to pay their dues is therefore crucial and Gordhan has promised to come down hard on tax evaders, saying the SA Revenue Service (Sars) will make more use of third-party information to widen the tax net.

How to spot tax fraud

• When someone offers you a discount for paying cash, or seems reluctant to accept card payments or cheques, VAT is probably not being declared.

  One Fin24.com user recently reported that his Vanderbijlpark suburb landlords collect rent from student tenants in cash, without reporting it for tax purposes. He thinks it is in the whole neighbourhood's interest to report such fraud to keep unscrupulous operators out of their area.

  These types of cash-based businesses can expect the screws to tighten in coming months, as Gordhan promised that authorities would take a much tougher approach towards them.

• If you don't receive an invoice for your payment, the business is probably not declaring the income for tax purposes. The same goes for putting money into a till without ringing up a sale.
• If you are asked to make a payment for goods or services to another party or if you are offered goods for sale at below the market value, alarm bells should also go off.
• Companies deducting Pay As You Earn (PAYE) tax from salaries without issuing IRP tax certificates, or who don't give salary advice slips, are committing tax fraud. Gordhan has warned that action against firms which do not submit PAYE and other taxes will be stepped up.
• If you know of people with extravagant lifestyles, particularly if they plead poverty about business affairs, it may be enough to tip Sars off.

  Property purchases, lavish parties and "exuberant" travel are often signs of tax fraud, says Sars spokesperson Adrian Lackay. Gordhan has warned that targeted lifestyle audits will also be intensified this year. Thousands of taxpayers have already been subjected to these kinds of audits.

  Sars uses information gathered from bank accounts, the deeds office, the car registration authority, banks, insurers, medical schemes as well as interviews with friends, family and even former colleagues for these audits. Audits can cover five years.

  If the information you provided to the tax man does not tally with the audit, you may face severe penalties and criminal prosecution.

• Tax fraudsters will often boast openly about how they manage to avoid paying Sars.

How to alert the authorities

Call the Sars Anti-Corruption and Fraud Hotline 0800 00 2870. Alternatively, file a Suspicious Activity Report on the Sars website. You may remain anonymous.

Helpful information to provide

• Company registration numbers or ID numbers.
• Tax registration number eg VAT reference number obtained from invoices; income tax registration number.
• Physical addresses.
• Postal addresses.
• Contact details eg telephone and cellphone numbers.
• Website addresses and e-mail addresses.
• Vehicle registration numbers.
• Accountant information.
• Nature of transgressions - detail on the type of transaction eg sales not declared, VAT not paid over, expenditure claimed.
• Lavish lifestyles, eg property purchases, parties, travel and exotic destinations.
• Tax schemes that are practised to avoid any tax liability.

Any reward?

Sars does not pay a reward for information received from the public, says Lackay. "It is each citizen's responsibility to report revenue loss, and with each report submitted a contribution is made towards building a great South Africa."

Something on your conscience?

If your tax affairs haven't been unblemished, now may be your last time to come clean.

The authorities will launch a year-long voluntary disclosure programme in November. If you disclose all information about your irregular tax conduct which Sars is unaware of, you will pay less interest and penalties on the outstanding amount. You will need to pay the full amount of tax owed, though.

- Fin24.com