Intentional Tax Evasion In Practice

2 Introduction

This chapter focuses on the different forms of evasion in practice. It also elaborates on the underlying reasoning or reasons behind these practices. Firstly, however, we need to identify SARS’s legislative obligatory framework within context.

2.1 Duties of SARS Section 2 of the SARS Act defines SARS as: “as an organ of state within the public administration. But as an institution outside the public service.” It deals with all the affairs of the taxpayers, both resident and non-residents that fall within the ambit of the Act.

SARS’s main duties and responsibilities include:

• Collect and administer all national taxes, duties and levies;

• Collect revenue that may be imposed under any other legislation as agreed on

One can say that the biggest issue or reason taxpayers evade their taxes is merely because of lack of knowledge, and in some cases you would find that the taxpayer has zero tax literacy, however some taxpayers just choose not to pay their taxes (Intentional tax evasion). It’s a good thing that, in South Africa, the SARS has an unprecedentedly successful and unmatched record since its establishment in 1997.

Intentional tax evasion has to be one of the biggest challenges in taxation law. Whilst determining whether the intention of the taxpayer was to make revenue income or capital can be quite difficult as taxpayers lie and give the impression that the income was of a capital nature while it’s of revenue. In the case of CIR v Stott, the following was said by Wessels JA with regards to the intention of a

This paper is of the view that, it can be done. In the case of SARS v Founders Hills (Pty) a group of individuals had assimilated a couple blocks of flats after a period of time, all revenue-producing capital assets. After some time the group decided to transfer all the flats they owned to one company. A sale was concluded in respect of a particular property, shortly after all the flats had been transferred to all the properties had been transferred to the company. The court held