When do we audit you? – A general explanation
At the outset, SARS audits taxpayers depending on the complexity of their tax affairs and their behaviour. A tax audit is an evaluation of the information that you will have submitted to SARS.
Many taxpayers, have at one time or another, received a letter from SARS asking them to submit documents in support of the claims they have made in their tax returns. For most taxpayers, the submission of the supporting documents is the end of their dealings with SARS – their information will have thus been verified. In some cases, SARS adjusts the tax assessment to reflect what is believed to be the true status of the taxpayer. Verification is conducted by an automated risk engine with the least amount of human intervention.
In a small number of cases, SARS is given a reason to audit a taxpayer’s declarations. An audit is conducted when, after verifying additional information from the taxpayer, SARS has identified a material anomaly that may cause it to look askance at a taxpayer’s declarations. It is important to remember that an audit is not conducted on the presumption that tax laws have been contravened but because taxpayer behaviour indicates that they may have been.
SARS has taken steps to ensure that an audit is not arbitrary and upholds taxpayers’ right to fair and just administration. SARS auditors do not choose cases to audit on a whim but are required to audit case arising from a workflow plan and within the remit of the law. Furthermore, the people who determine whether a risk associated with certain declarations warrants an audit are not the same as those that do in fact conduct an audit. As with other processes at SARS, the secrecy of taxpayer information is maintained without compromise throughout an audit.
The fairness of SARS processes is not an altruistic choice of the Commissioner. It is an obligation imposed by the law. Furthermore, it is essential and necessary. Compliant taxpayers are thus assured and continue to meet their obligations when they can see and know that SARS will act against free-riders. Another important principle for fairness at SARS is proportionality. In another context, it could simply be said that “punishment must fit the crime”. In a sense, proportionality is simply reasonableness. Certain forms of non-compliance attract only administrative penalties e.g. late submission of tax returns. Those penalties are graduated according to the extent of the transgression. In other cases, there could be fraud which is a serious infraction of the law and must be criminally prosecuted. The recently enacted Tax Administration Act
recognises these differences and is attenuated to them.
To ensure compliance with the tax laws, it is necessary that SARS reaches the largest number of taxpayers it can while, at the same time, conducting in-depth investigations of a few. The manner in which taxpayers are reached can vary from a simple reminder to submit outstanding tax returns to a criminal investigation. Realising that SARS may reach any taxpayer, any time, ensures that opportunities for evading tax are reduced and this deters those taxpayers who might consider evading taxes given an opportunity. Acting credibly against those that deliberately and egregiously transgress against the law discourages the most determined evaders.