The tax authorities do not have goon squads running around trying to catch tax invaders. Why not? Well, when the evader dies, there are two possible scenarios. The person could have no assets, in which case the tax authorities lose interest because there is nothing to collect. But what happens if he accumulated wealth? His estate has to be wound up. The final stage of this process is the inspection of his file by the Master of the Supreme Court. But the file has to go there via the Receiver of Revenue’s office, its at this stage that the tax people say ‘we have no record of this person, Mrs Widow please provide us with copies of your husbands tax returns”. “Oh he never submitted any, not paid any tax”.’ Well we calculate that for him to have an estate worth R1 million, and for you to have lived for the past 20 years, he would need to have made about R3 million. The tax on that would have been about R1 million, so we’ll have it. Sorry Mrs Widow”
So you could leave your family without any money when the taxman takes what’s due to him – plus of course the penalties which could be treble the tax you should have paid? Is it worth it?
Of course, the receiver doesn’t always wait for people to die. Some tax evaders’ stupidity helps a lot. You’ve probably read newspaper articles about a burglary at Mr Shopowners house, where R50 000 in cash and jewellery worth R30 000 was stolen. You can bet that somebody at the tax office is going to have that tax file out and look to see whether that kind of loss is in keeping with the income that has been declared in the past. People who have businesses with cash taking are very tempted to ‘steal’ from themselves and only declare part of their income. A business owner once told me, “I bank all my cash except the R100 notes, those are mine”.
And then there are the people whose lifestyles do not gel with the income they declare. If this comes to the attention of the tax authorities, then difficult to answer questions will be asked. Assets must have been acquired through income. If you claim to have won at Sun City too often this won’t help because you will then be classified as a professional gambler – and your winnings will be taxable.
If you’re one of those people who have been, ah, shall we say, out of touch with the tax authorities, what can you do? If you’ve been earning a salary and have had tax deducted from every payment received then the best thing to do is to make sure that you have all the IRP5’s, retirement annuity details and so on for all the years for which returns are outstanding. Then go down to your local tax office and ask for help. Pleasantly. And you’ll be pleasantly surprised. One can get more friendly and efficient assistance, from the tax office than the Post Office or any other government department.
If you go to them, rather then them catching up with you, penalties can be kept to a minimum and their assistance is free. If you’ve been in business and have neither submitted tax returns nor paid tax, then you need to go to an accountant who specialises in your ‘size’ of tax return. If you’re a small operation you’ll be better off going to a smaller accounting practice rather than a big one. You need empathy and lower operating costs.
You also need someone senior dealing with your return, which is not always the case when the little guy goes to the big accounting firm. What it costs depends on time. Hand over muddled cartons of paper and you have to pay for it to be sorted before it can be processed.
Coming clean takes some courage. But no matter how much people may hate paying tax, they always sleep a little better when they have no outstanding business with the taxman.