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Thread: Criminal record

  1. #1
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    Criminal record

    Please consider the following hypothetical scenario.

    A postgraduate student is studying on a R140k pa scholarship. During her studies, she does a once-off contractual job for a small company.

    For this she gets paid R30k, but for a R10k bonus, she agrees to be paid R90k into her bank account. This is done so that their funding requirements are met, when in fact, the extra R50k will be paid to another worker. She must then cash out R50k and give it back, in cash, to the company so that they can pay the other worker.

    She recognizes that she has to pay tax, but as she is a student, she must first register with SARS. She phones SARS to try and find out how to fill in the forms, but they are clueless and tell her to get IRPs and ITs andsoforth from the company, which the company cannot give since she is not an employee. She decides not to register.

    Let us say, that 3 years later, still being on a scholarship, her conscience begins to bother her. She begins to worry in all manners, especially about the possibility of getting a criminal record 5 or 7 years down the line, because of her one indiscretion. She especially worries how a criminal record might hamper her chances of applying for citizenship in say Canada or Australia.

    She goes through her online bank statements, trying to find the record of payment 3 years ago, but the bank does not keep records for that long online. Suddenly she can't remember if the payment was made once or in two installments over two different tax years.

    In this hypothetical world, she now has to make a choice. She thinks that if she can't even find the records, how will SARS ever know about it or find it. She thinks that it will do more harm than good to try and reconcile. She thinks that there is a very high probability, with no more indiscretions, that this will forever be forgotten. She thinks that SARS has much bigger fish to fry, and that most people audited by SARS are actually the ones registered with them. She is not registered in this hypothetical world.

    What would you recommend for such a hypothetical girl to do?

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    The fact that she has a guilty conscience says a lot about her character. I don't know if this is good advice, but I would just keep quiet. I can just see the confusion if you try and do the right thing with SARS. I don't think they will know what to do about it. Do you even have to pay tax on an annual income of R40 000?

    Why not donate the tax she would have been liable for to a charity?
    Sometimes the only transport available is a leap of faith

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    Silver Member geraldenek's Avatar
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    going back to even 4 years ago you would not have to pay tax on R40,000
    Geraldene Kapp
    Professional Tax Help
    www.mytaxhelp.co.za

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    Even if she was found to be owing, worst case a fine, and interest...i seriously doubt a criminal record?

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    Site Caretaker Dave A's Avatar
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    SARS is the least of her worries here.

    Assuming the intent is to have the R90k taxed in her hands as income, and R50k of that paid over to someone else as undisclosed (tax free) income - hypothetically it seems she is money laundering.

    If the intent is to disclose in the records of the company that her services cost R90k, but R50k is going to someone else with a questionable right to the money, then hypothetically she is a party to the defrauding of that company.

    Hypothetically this reaks of corruption and redemption probably lies in blowing the whistle. Getting the case to court, however, would be problematic if there is no tangible evidence or corroboration of testimony. I'm sure the recipients of the loot would deny all knowledge, involvement or responsibility in similar manner to... well - I was going to mention some rather public examples of brazen denial in the face of pretty strong evidence, but the ruling party might take offence.

    Getting her off the hook with SARS is probably dead easy right now. She should look at the Voluntary Disclosure Program under which she would hypothetically only have to pay the tax on R90k without penalties and interest for redemption in their eyes, at least if she does this before the end of October 2011 when the offer expires.
    The trouble with opportunity is it normally comes dressed up as work.

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    Quote Originally Posted by Dave A View Post
    Assuming the intent is to have the R90k taxed in her hands as income, and R50k of that paid over to someone else as undisclosed (tax free) income - hypothetically it seems she is money laundering.
    Let us assume in this scenario, that the R50k is declared by the second contractor as part of his/her taxable income.

    The element of fraud here, if there is any, is that the company who hires the two contractors (including the girl) tells their angel investor that they paid all of R90k to the girl (in order to meet the angel investor requirements). When in fact, the girl pays back R50k in cash to the company, which they then give to the second contractor in cash. It is just not registered with the angel investor, but the second contractor lawfully declares to SARS the R50k as part of his/her income.

    The concern of the girl, is that SARS could show that she received R90k from a company, which is in excess of R57k and thus taxable. She cannot prove, however, that R50k of the R90k has already been taxed, because there is no paper trail due to the cash transfer of R50k back to the company. All hypothetical, of course.

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    Site Caretaker Dave A's Avatar
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    It would be handy if she had an invoice or receipt from the second recipient. And as the second recipient declared the income, they shouldn't have any objection to providing one.

    This would then be provable as a legitimate deductible expense incurred in the generation of income.
    The trouble with opportunity is it normally comes dressed up as work.

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    Thank you Dave A, very good and thorough answers. Thank you all for analyzing this scenario, much appreciated.

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    Hi there,

    Well, if it wasn't picked up yet, you can just forget about it. I doubt they will ever find out.

    If it is a moral issue, then just donate the cash you would have spent on the tax. The money would then in anyway be better spend...

    Regards,
    Mr Smit

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