The Tax Administration Act holds an employer liable for an amount of tax withheld and not paid to SARS, or which should have been withheld but was not withheld. The employer could also be held criminally liable for failure to withhold and pay PAYE.

SARS’ Criminal Investigations Division has already handed over 30 non-compliant employers to the NPA in their new joint venture and are working to identify and prioritise more cases.

They are further enabled by recent changes to the tax laws that effectively lowered the threshold for criminally prosecuting taxpayers through removing the requirement to prove that the taxpayer’s conduct was “wilful and without just cause” for selected offences. While previously a mistake made by a taxpayer was only a crime when it was done “wilfully and without just cause”, taxpayers can now in certain cases be convicted of an imprisonable criminal offence even if non-compliance was due to negligence or ignorance. Offenses include, among others, failure to submit a return when required to do so; failure to retain all relevant substantiating records; failure to provide any information requested by SARS; or failure to disclose any material information to SARS.

This, along with SARS’ and the NPA’s intensified focus on employers, as well as SARS’ increased abilities to draw taxpayer information from third parties, make an employee tax audit a necessity.

It also protects employees. Employees’ tax is not a separate form of tax, but rather an amount that the employer is obliged to withhold in respect of the employee’s liability for normal tax. On assessment annually, the employee’s tax withheld is set off against the employee’s liability for normal tax. The correct calculations and deductions will certainly help protect employees from unexpected surprises on assessment, and will also ensure that the employer’s processes are not the cause of disputes or delays when, for example, an employee needs to claim UIF.