Sars tightens its grip on tax penalties

The so-called listed behaviours such as ‘reasonable care not taken’ could become academic. Picture: Moneyweb Ways to escape the penalties have also become more limited with the latest change to the act. The bona fide inadvertent-error defence can no longer get a taxpayer out of the penalty regime from the start.

Understatement penalties range from 10% to 150% in a standard case and between 20% and 200% if the taxpayer is obstructive or it is a repeat case. Nico Theron, founder of Unicus Tax Specialists, explains the nub of the issue: If the taxpayer brought the matter within the bona fide inadvertent-error defence, the case fell outside the understatement-penalty regime altogether. Theron says the listed behaviours – reasonable care not taken, no reasonable grounds for the tax position taken, gross negligence, intentional tax evasion, and even substantial understatement – could become academic.

“That structure explains why the old law could short-circuit the entire penalties enquiry. It also explains why Sars became increasingly dissatisfied with the bona fide inadvertent error location in the statute.” With the amendment from 1 April, Sars first wants to establish whether the understatement resulted from a non-compliant behaviour set out in its table.