Budget 2013/14 Highlights
21 May
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21 May

Administrative non-compliance – and understatement penalties

image1bIn his latest budget speech the minister clearly stated that Treasury is finding itself in a challenging period, with revenues lower than expected by R16,3 billion compared with estimates at the time of the 2012 budget.

From the above it is clear that Treasury will use every endeavour to increase the collection of taxes including administrative- and understatement penalties.

We as taxpayers have felt over the past years the effect of penalties being imposed on almost any non-compliance. For the fiscal year 2012 SARS has collected over R1 billion rand from imposing the abovementioned penalties.

What is this non-compliance penalties?

In a short guide to the Tax Administrative Act, 2011 (“TA Act”) SARS explains the administrative non-compliance penalties as follows.

Introduction and purpose

The principal goal of sanctions in the form of administrative penalties is based on a simple promise – the threat of punishment deters unwanted behavior (i.e. non-compliance and tax evasion).

For sanctions in the form of administrative penalties to be effective the following is fundamental:

  • Administrative penalties must be easily understood by taxpayers
  • Certainty of being penalized must exist in the mind of the taxpayer
  • A discretionary judgment in imposing penalties must only be required where non-compliance is based on negligence or intent.

The non-compliance levies consist of two types of penalties:

  • Fixed amount penalties
    A fixed amount penalty will be imposed when a taxpayer does not comply with an obligation that is legally required from a taxpayer.
    The amount of the penalty will increase automatically for each month that the taxpayer fails to remedy the non-compliance.

Table of fixed amount penalties.table1

Percentage based penalties

The percentage based penalties are imposed if SARS is satisfied that an amount of tax was not paid as and when required under a Tax Act.

Examples when the percentage-based penalty will be imposed

table2

Understatement Penalties:
An understatement penalty may only be imposed if the fiscus is prejudiced by the Taxpayers’ conduct in reporting i.e.:

  • Filed a return
  • Filed a return but omitted an item from the return
  • Filed a return in which an incorrect statement was made

Table for understatement penaltiestable3

Taxpayers be aware of non-compliance, SARS is ready to penalize you.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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