Has Sars taken a stand against corruption?

The 2021 Tax Statistics Report released on January 25 made no mention of the cost to the fiscus of state capture and tax evasion.

This raises the question: Has the South African Revenue Service (Sars) taken an active stand against corruption?

The report contained the statement: “The surplus in tax revenue collections was further supported by the continuous efforts by Sars to improve tax revenue administration through targeted strategic enforcement interventions to achieve higher taxpayer compliance ratios.”

Questions

Moneyweb sent questions to Sars on January 27 requesting specific details of “continuous efforts”, the meaning of “targeted strategic enforcement interventions” and “higher taxpayer compliance ratios”:

1. What specifically has Sars done to ensure that the individuals, companies and trusts linked to corruption in recent reports – such as the Nugent Report, the first Zondo report on state capture, and the SIU Final Report on ‘Investigation into the procurement of, or contracting for goods, works and services etc’ and the SIU Report to the President on the Investigation of the National Department of Health/Digital Vibes contracts – have now been registered for tax and are being subjected to audits?

2. Can Sars confirm that it has established a comprehensive list of all these individuals, companies and trusts, to ensure that every one has been registered for tax, that no one escapes the tax net, and if the correct amount of tax has not been paid, that they are undergoing audits?

3. How many matters involving individuals, companies and trusts has Sars handed over to the NPA [National Prosecuting Authority] over the last 24 months?

4. Has Sars considered separately reporting on these matters, without naming the parties concerned until they have been prosecuted, to appease the public that Sars isn’t only going after small time crooks, and also has these major tax evaders in its sights?

5. In holding these individuals and entities accountable, is Sars following a two-pronged process, that of raising assessments on undeclared income, and simultaneously handing them over to the NPA to prosecute?

6. If it is not possible to engage in a two-pronged process, and taking into account the delays in the NPA, is Sars then auditing/raising assessments on individuals before they are to be handed over to the NPA?

7. What specifically has Sars done to ensure that the NPA is actively pursuing these individuals and entities?

8. In regard to Sars’s reference to “higher taxpayer compliance” – a ‘taxpayer’ is someone who has registered for tax, not someone who has never registered for tax. What specifically is Sars doing to register and audit the many individuals and entities who are under the radar?

9. If Sars does not aggressively pursue the taxation of these individuals and entities, is Sars not concerned that by the time its auditors get to them there will be no assets left to pay the tax debts?

10. Has Sars entered into any settlement agreements with any individuals or entities that have been named in the above reports over the last two years? If so, is Sars not obliged in the interests of transparency to disclose the total amount (not the names) and the reason why a settlement was reached? Would Sars disclose the percentage of the settlements reached to the tax amount; for example, 50%?

Sars was also asked whether it takes proactive steps:

• If it obtains reports on large cash transactions from the Financial Intelligence Centre and dealers in luxury motor vehicles.

• What happened to the lifestyle questionnaire?

• Why there is no permanent record of naming and shaming on its website, which is permitted once a taxpayer has been convicted/found guilty in a court of law.

Sars has not responded to Moneyweb. Its silence is deafening.

Expert comment

Moneyweb approached Bowmans partner Patricia Williams for comment.

Williams agreed that Sars could follow a two-pronged process, that of raising assessments on undeclared income and simultaneously handing the parties over to the NPA to prosecute.

She said there are different rules for disclosure to the South African Police Service (SAPS) and the NPA, depending on whether the relevant crime is a tax offence or a different offence. The Tax Administration Act (TAA) allows Sars to disclose taxpayer information to the SAPS or the NPA “in the course of performance of duties under a tax Act or customs and excise legislation”, where the information is material for the proving of a tax offence.

She added that disclosure is also permitted in criminal, public safety or environmental matters.

However, Sars would have to follow the correct procedures as set out in the TAA in providing this information.

The use of certain incriminating evidence

Williams cautioned that there are certain rules “restricting the use of certain incriminating evidence, for example incriminating evidence obtained during an inquiry can generally not be used against the witness”, [which] “makes sense because the witnesses are called to testify in order to try to elicit evidence of tax non-compliance or offences by a specific named person, not the witness [themself]”.

Williams went on to say that “an admission of a tax offence obtained during the normal Sars information gathering provisions is normally not admissible in criminal proceedings against the taxpayer concerned”.

“However, Sars can still obtain and use other evidence [apart from the relevant admissions] that demonstrate the commission of an offence.

“Overall, then, Sars is uniquely positioned to help fight crime, through the sharing of information with SAPS/NPA, and Sars could and should share relevant information – following due process – in addition to recovering applicable taxes.”