In life, but more so in tax, you are the master of your destination.

If you don’t declare income and are obstructive in a tax audit, your destination is SARS’ wrath.

A taxpayer who avoids or evades tax faces understatement penalties (USP). The USP can range from 10% in a normal case, up to 200% if a taxpayer intentionally evaded tax and was obstructive. USP is not applicable in the case of a bona fide inadvertent error.

The normal 10% will, however, also not be levied if the prejudice to SARS or the fiscus exceeds the greater of five per cent of the amount of ‘tax’ properly chargeable or refundable under a tax Act for the relevant tax period, or R1 000 000.

A taxpayer has a right to object to an assessment and has to convince SARS to allow the objection.

The objection has to be valid, in which case the taxpayer has to set out the grounds of the objection in detail, including:

-        specifying the part or specific amount of the disputed assessment objected to,

-        specifying which grounds of assessment are in dispute, and

-        submitting any documents, not previously delivered to SARS, to support the objection.

If an objection lacks sufficient detail, SARS can regard it as invalid, but must deliver a notice with reasons to the taxpayer within 30 business days. The taxpayer may, however, deliver a new augmented objection within 20 business days thereafter.

It emerged recently in Tax Court that SARS was perturbed by a Cape Town-based neurologist’s income tax, VAT, and donations tax, and was also frustrated by the taxpayer’s obstructive behaviour during SARS’ audit.

SARS assessed the neurologist for various taxes, including 200% USP, amounting to R87 million in total.

The taxpayer ostensibly appointed professionals to assist with the first objection, which SARS regarded as invalid due to its lack of specificity. To cure the invalidity, the taxpayer filed an augmented objection, but SARS also found this invalid.

The taxpayer then proceeded to Tax Court to challenge SARS' decision invalidating the objection, but Magardie AJ unfortunately held that the taxpayer did not ensure that SARS was placed in a position where it was able to properly determine the merits of the objection and whether to allow or disallow the objection in whole or in part.

One can only speculate that the taxpayer requested that SARS suspend the tax debt pursuant to the assessment, but following the outcome in Tax Court, the assessment will be final, and the tax will be due and payable. The taxpayer could appeal to a higher court, thereby deferring the finality of the assessment.

The neurologist should have his mind read, because tax evasion is an offence and if found guilty, is subject to a fine or imprisonment for a period not exceeding five years.