Fraudulent Tax Returns On The Rise

Author: Amanda Visser (Businessday)

The South African Revenue Service (SARS) has seen an increase in fraud cases where so-called tax consultants promise substantial tax refunds to taxpayers in return for a share of the anticipated refund sometimes up to half of the amount in question.

The South African Institute for Tax Practitioners said yesterday it was impossible for any tax practitioner or adviser to guarantee a refund for tax returns. “Assessment for tax refund or liability is strictly a technical and legal process, based on an individual-to-individual basis,” said the institutes head of tax technical Sharon Smulders.

As the deadline for electronic submission by individual taxpayers of their 2013 tax returns approaches on November 22, suspected syndicates are particularly prevalent at this time, SARS spokeswoman Marika Muller said. Provisional taxpayers have until the end of January to submit their returns.

She said taxpayers were “persuaded” by fraudsters to hand over personal information such as bank account numbers, log-on details for the SARS electronic filing system. They then submit revised tax returns on behalf of the taxpayer and fraudulently claim the refunds.

Last month SARS and the police conducted raids in Mpumalanga, resulting in the arrests of 28 people who had submitted fraudulent income tax returns on behalf of at least 200 individuals. “It is possible that the arrested individuals were tax practitioners or were masquerading as such. The total amount of fraudulent claims was just over R7m,” Ms Muller said.

Chris van Dyk, legal and compliance officer at the institute, said since July 1, when the regulation of tax practitioners became effective, percentage-based professional fees, based on the amount of refund, are not permitted for registered tax practitioners. He said taxpayers must ensure that their tax adviser is registered as a tax practitioner with both SARS and a recognised professional body.

“While the criminal prosecutions against the 28 individuals will be pursued before court, SARS is also in the process of taking civil action to recover fraudulent refunds from the taxpayers involved.”

Ms Muller said the supply of fraudulent information places the taxpayer at serious risk of being arrested for fraud because taxpayers are ultimately responsible for tax returns submitted in their name, even if by third parties.