Are you fiddling your taxes? Here’s how SARS can catch you…
So you still think that you can get away with cheating on your taxes? With enough rope, you’ll hang yourself. Here are some of the ways that your stupidity helps SARS to catch you.
Unexplained growth in your asset base
Directors of companies, members of close corporations, and taxpayers who conduct business for their own account, are required to complete a Statement of Assets and Liabilities as part of their annual tax returns. This statement should include all assets at cost and all liabilities at face value.
SARS uses this statement to determine whether or not you have declared all of your income. How so? If, for example, you have declared a net asset position of R1 million in 2017 and R1.5 million in 2018, SARS will become somewhat suspicious if you have only declared income amounting to R300 000. The logic is obvious – how did you manage to increase your asset base by R500 000 on an income of only R300 000, and at the same time, meet your normal living costs?
Your lavish lifestyle
Have you ever driven around a parking lot in an upmarket shopping centre and wondered who the lucky driver of that Lamborghini or McLaren is? Well, guess what – that chap struggling to heave his baby’s pram into the boot of that innocuous-looking Toyota Yaris is just as curious, and when he returns to his office on Monday morning, he can satisfy his curiosity by checking out the registration number on the SARS computer systems.
What’s more, he also has the ability to find out what kind of income the owner of that brand-new Range Rover is pulling in order to support that beast’s thirst for 93-octane unleaded, and he also knows what sort of monthly payments go with such a car. If the income declared falls somewhat short, he starts to ask some nasty questions.
The same goes for that fancy pad at Zimbali Lodge – a simple Deeds Office search will tell our intrepid SARS auditor exactly how much you paid for your view of the 17th fairway, and if you have a bond against the property, he also has a good idea of what sort of salary the bank would require to grant such a loan.
The road most travelled
If the tax returns of many people are to be believed, there must be a large number of luxury vehicles out there with odometer readings in excess of 300 000 kilometres. Inflating odometer readings is the oldest trick in the book when it comes to inflating travel allowance claims.
SARS now uses a highly-sophisticated device in order to clamp down on such abuse – the telephone. This device enables the auditor to contact you to request that you make your vehicle available for inspection. They are nice chaps, too – they are quite happy to come to your home or place of work, so as not to inconvenience you too badly.
Furthermore, now that it has become compulsory to submit a logbook to support one’s business travel claim, our friends at SARS have become quite adept at using Google Maps to determine whether your round trip between Johannesburg and Pretoria bears any relation to reality.
I was recently at a function with a SARS friend of mine (yes, SARS auditors do have friends!), and I posed the following question to him: What is the easiest way to catch a tax evader? His answer would send chills down the spine of anyone who has ever ended a relationship or fired someone, since it seems that most of SARS’ tip-offs come from ex-wives, ex-girlfriends, and ex-employees.
In fact, with SARS now installing anonymous tip-off lines, even current employees who have had one too many tongue lashings from their boss can whisper enough words into SARS’ ear to give the boss, as well as his business, a lot of quality time with a SARS auditor, followed by a large tax bill issued thereafter.
The moral of the story? If you are fiddling your taxes, don’t upset anyone!
Have you ever wondered why suppliers insist on asking you for your VAT number whenever your business buys something? It’s not just to give their clerks something to do – it’s to comply with the VAT Act. In fact, if the invoice does not contain both the suppliers’ and your VAT numbers, as well as other required information, you will not be able to claim the input VAT when submitting your own VAT return.
But why would SARS create such bureaucracy? The reason can be found in the childhood game known as ‘broken telephone’ in which you receive a message, which you pass on to your friend, who passes it on to the next, and so on. For SARS, these requirements allow them to create a chain – when they audit you, they record the VAT numbers of your suppliers, and then schedule audits with them, and record the VAT numbers of their suppliers – and so the trail goes.
Since VAT is the third-largest source of taxation revenue (after individual and corporate taxes), it doesn’t take a rocket-scientist to figure out that SARS will deploy more and more manpower on VAT audits.
Keep you hands out the cookie-jar
Gone are the days when only one type of tax would be examined, and the simplest way for SARS to catch out errant taxpayers who are skimming cash out of the till is to compare the VAT returns against the income tax returns.
If the sales on the VAT return are greater than the income tax return, SARS nabs you for under-declared income, and claims the resultant income tax. If the income tax return shows greater turnover than the VAT returns, he hits you for undeclared VAT.
Most business owners do not have sufficient knowledge of the tax laws to cover all bases when it comes to submitting returns, and often get caught out when SARS checks one form of tax against another. And if the accountant is caught assisting the business in such schemes, a nasty letter will find its way not only to the accountant, but also to their professional body, which is likely to result in a sudden and enforced career change as the member becomes an ex-member.
Besides, those 200% penalties, not to mention a criminal record, can really ruin your whole day!