SARS warns against fraudulent tax advisors

"SARS wants to appeal to all taxpayers to exercise caution if they are approached by tax advisors who guarantee them a tax refund on submission of their income tax returns. Anyone who guarantees a taxpayer a tax refund may be misleading them and should be avoided," said the revenue service on Tuesday (15 October).

SARS has seen an increase in fraud cases involving personal income tax returns where "tax consultants" or intermediaries, having promised clients substantial tax refunds (in return for a 'cut' of up to 50% of the refund) submit fraudulent tax returns on behalf of the taxpayer.

Last month, with the assistance of the South African Police Service (SAPS), SARS conducted raids in Mpumalanga, which resulted in the arrest of 28 people who had submitted fraudulent income tax returns on behalf of at least 200 individuals, on the understanding that they would keep a percentage of the fraudulent refund generated.

"It is possible that the arrested individuals were tax practitioners or were masquerading as such. The total amount of fraudulent claims in these cases is just over R7m," SARS said.

East London case

Tax practitioner Lusindiso "Maxwell" Mhlwatika's case is currently being heard in the East London Regional Court. Arrested in 2010, Mhlwatika fraudulently claimed tax refunds for various public sector employees who he approached. He allegedly submitted fraudulent tax returns on their behalf, claiming that they were entitled to tax deductions for, among other things, working abroad and working from home.

He is alleged to have charged individual taxpayers between R400 and R1,100 in fees, in return for which he used their eFiling usernames and passwords to submit the fraudulent returns. He faces 290 counts of fraud and 145 counts of submitting fraudulent tax assessments. The monetary loss to the fiscus was about R1.5m.

On 10 October, SARS and the SAPS conducted a search and seizure operation to gather evidence in Bushbuckridge. The search focused on collecting both documentary and electronic evidence for an investigation into a fraudulent tax refund syndicate. The suspects are alleged to have filed fraudulent claims on behalf of taxpayers and obtained between 15% and 30% of each of the refunds claimed.

SARS says the activities of suspected syndicates are particularly prevalent at this time as the 22 November deadline for the submission of tax returns looms.

"Many qualified and registered tax practitioners offer important services to taxpayers by assisting them with their tax affairs and by submitting tax returns to SARS. Unfortunately, a minority of those might be dishonest. Additionally, some individuals pretend to be tax practitioners with the intention of defrauding SARS and the unknowing taxpayer.

"SARS urges taxpayers not to fall for conmen who promise them guaranteed tax refunds. The only way a refund can be guaranteed is if fraudulent information is submitted in a tax return. This 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 this is done by third parties," SARS said.