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25 May 2015 – Huge successes in criminal convictions for tax crimes in 2014/15

25 May 2015 – Huge successes in criminal convictions for tax crimes in 2014/15

PRETORIA, 25 May 2015 – Over the past financial year, SARS achieved a 92% conviction rate on cases which it handed over to the NPA to prosecute involving tax and customs-related crimes. Most of those cases involved high net-worth individuals, fraudulent VAT refunds and Income Tax fraud. These convictions illustrate that SARS has the capability to investigate tax crimes effectively despite recent speculation that its enforcement capability has been diminished.
This month alone, 30 cases have been approved for criminal prosecution. Charges relating to these cases will now be laid with the South African Police Service.
Over the 2014/5 financial year, there were 256 individuals/entities convicted in cases involving R196 million, with fines totalling R9.6 million issued.
An effective 555 years of imprisonment, 258 months of correctional supervision and 2480 hours of community service were handed down to those convicted.
In terms of the different crimes involved, there were 32 convictions for VAT fraud, 73 convictions for Income Tax fraud, eight for tobacco-related crimes and nine involving the construction industry (largely for tender fraud), amongst others.
Examples of cases that were finalised over the past year include:
  • Mr Lucky Thulani Mavimbela was involved in the smuggling of illicit cigarettes from Zimbabwe to South Africa. He was caught in possession of various brands of illicit cigarettes (256 master boxes and 2450 cartons in total) amounting to R2 914 334 in July 2013. The accused was convicted on 6 June 2014 at the Modimolle Regional court after pleading guilty.
Although he was a first offender, he was sentenced to five years direct imprisonment. The amount of cigarettes was not huge compared to some of the bigger seizures that SARS makes, but the fact that we obtained a five year direct imprisonment should go a long way to making a statement about this growing crime. It also indicates that even in smaller courts, the judiciary is taking note of the problems regarding the smuggling of illicit cigarettes.
  • Following a high-profile investigation into the livestock industry in the Free State, SARS investigators discovered that several farmers and agents were committing VAT fraud. Assessments were raised on several farmers who made misrepresentations to SARS and hefty additional penalties and interest were charged and collected by SARS. In addition, the following accused were convicted in the Bloemfontein High Court on charges of fraud to the value of R7 448 489:
    • Mr G L Prinsloo was convicted on 75 counts of fraud and was sentenced to a fine of R600 000 or six years imprisonment of which R200 000 or two years imprisonment was suspended for 5 years.
    • Mr S H de Villiers was convicted on 444 counts of fraud and was sentenced to ten  years imprisonment or a fine of R2 million of which five years or R1 million was suspended for five years on condition that the accused pay back SARS an amount of R3 million.
  • One of the Gauteng cases related to a lady previously convicted of VAT fraud in the Germiston magistrate court. Mrs Malthi Sooknunan, the director of Ashley’s Restaurant (Pty) Ltd, failed to comply with a court order relating to several contraventions of the VAT Act. She was originally sentenced to 8 years imprisonment wholly suspended for 5 years on the following conditions:
    • The accused is not convicted of fraud or theft committed during the period of suspension
    • The accused repays SARS an amount of R926 579 at the rate of R10 000 per month with effect from 1 June 2008 with a final payment of R10 927.
However, she failed to comply with the court order and was re-arrested on 23 September 2013. The sentence of 8 years direct imprisonment came into effect in April 2014. It is important to note that SARS investigators regularly follow up on individuals that received suspended sentences and were ordered to repay money.  We regularly engage the court according to the procedures available to activate suspended sentences when the accused do not comply with a court order.
  • In the Western Cape, Zaidah Kamish Johaar, who was employed by a reputable Chartered Accounting firm as a Tax Compliance Officer and purported to be a Tax Practitioner, submitted multiple fraudulent Income Tax returns on behalf of 95 taxpayers resulting in a total loss to SARS of R1 427 057. She pleaded guilty to 98 counts of fraud and was sentenced to four years direct imprisonment. What was unusual about this case was that the State got a confiscation order for the accused to pay the State R87 956, which was the amount in which she benefited from her fraudulent activities.
Tax defaulting is an offence against society as the offender invariably gains an unfair advantage over the compliant taxpayer, both commercially and personally. This offensive conduct also shifts the tax burden onto those who do comply with their obligations.
In this respect, responsible taxpayers have a legitimate interest in knowing that SARS does act against those who do not comply and who intentionally abuse the tax system.
We call on the South African public to be vigilant and report any suspected tax offences by calling the SARS Contact Centre on 0800 00 7277, visiting your nearest SARS branch or accessing the RSN01 form from the SARS website Report a tax crime | South African Revenue Service (sars.gov.za), completing it and submitting it to SARS.
SARS strives to be as efficient and effective as possible in fulfilling its core mandate of collecting all revenue due, ensuring maximum compliance to all tax and customs laws and providing a customs service that optimises revenue collection, protects our borders and facilitates legitimate trade.
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