Sars closes in on tax evaders

Cape Town - A certain South African taxpayer has worked out an elaborate scheme to avoid paying R1.2bn in tax, said South African Revenue Service (Sars) commissioner Oupa Magashule on Tuesday.

In a submission to the parliamentary standing and select committees on finance regarding the Tax Administration Bill he said the tax court had decided to impose a 200% penalty on a case of R1.2bn in tax evasion. It says it had cost Sars more than a decade to get this case to court. The objective of the new bill was to make it easier to finalise this type of investigation.

Magashule said the taxpayer concerned had, with a clever team of attorneys, contested the case on every technical point to stretch it out as long as possible.

Sars was currently investigating 68 schemes of major tax evasion, with 47 cases having been finalised in the past year.

Magashule explained that although existing tax legislation had been frequently amended, it was still based on legislation drawn up in 1962.

The new bill is a provisional step in rewriting the entire Income Tax Act.

The administrative part involves about 25% of the tax legislation and is intended to simplify provisions of the act, making the legislation easier to understand.

The bill makes provision for self-assessment by taxpayers. Whereas taxpayers currently submit their returns and then receive an assessment, provision is now made for taxpayers to determine their tax liability themselves and then pay what is required.

The legislation is also aimed at improving tax collections.

Magashule said tax avoidance undermined the morale of serious taxpayers and placed an unfair burden on them. SARS had to actively institute legal proceedings against tax dodgers to instil confidence in the integrity of the tax system.

According to Magashule the tax administration laws of Australia, Botswana, Canada, New Zealand, Britain and America were evaluated when the bill was drawn up. But he assured the committee that the legislators had not merely done a cut-and-paste job.

Controversial proposals in the legislation include the introduction of a tax ombudsman, new powers for SARS enabling it to perform search and seizure without a warrant, and allowing institutions like the Reserve Bank, the Financial Services Board and the National Credit Regulator access to certain taxpayers' information.

Frans Tomasek, group manager for legislation at Sars, said the bill also makes provision for the collection of biometric information on registration for VAT, so that identity and other fraud can be combated.