Tax evasion is the illegal non-payment or underpayment of taxes, usually by making a false or no declaration to tax authorities – for example, declaring less income, earnings, or gains than the amounts actually obtained, or overstating deductions.
According to Mark Diuga, regional wealth manager at Overberg Asset Management in Cape Town, there isn’t so much a fine line between tax evasion and tax planning as there is a massive grey expressway that connects the two.
The South African Revenue Services (SARS) crackdown on non-compliant taxpayers has been widely publicized in recent months. The National Prosecuting Authority (NPA) is sending summonses to individuals who have delinquent tax returns as part of the tax body’s ongoing compliance push.
“The tax we pay to the government is our contribution to the well-being of South Africans.” It is required for the construction of highways, schools, and hospitals. As citizens of our country, we require it to ensure our safety and security. Without it, we must borrow from other countries and institutions, such as the IMF, on less-than-favorable conditions, according to SARS.
“SARS will make it difficult and costly for any taxpayer who deliberately and purposefully wants to breach the law,” it stated, adding that “we expect every taxpayer to meet their commitments and pay their fair amount of tax.”
Tax evasion is the use of illegal means to pay less or no tax. Typically, this is considered fraud, i.e., misrepresenting claims or presenting false information to the South African Revenue Service (SARS), which carries jail time.
Tax Planning: You may legally arrange your financial affairs in such a way as to reduce your tax liability; a commonly used approach would be to make contributions into a retirement annuity in order to receive a tax refund; by doing so, you can use the funds to build long-term wealth while deferring an income tax liability until the point of receiving a benefit.
Tax evasion: everything in between that results in you paying less tax than SARS would like.
In South Africa, what is the penalty for tax evasion?
“Where a taxpayer has an assessed loss, each monthly administrative non-compliance penalty may be R250, but the penalty may be R16,000 per month if the taxpayer has taxable income of R50,000,001 or more.”
What is the most popular method of tax evasion?
However, most tax evasion instances do not make headlines. Taxes are typically avoided by one of three methods: underreporting, underpayment, or non-filing.
In South Africa, can you go to jail for failing to pay your taxes?
“You can now face criminal charges if you fail to file your tax return, even if it was inadvertent,” Du Toit explains. For less serious offenses, such as failing to file a return, you can face a fine or two years in prison.
