The recent crackdown on the cash and carry sector in SA seems to be bearing fruit.

The South African Revenue Service (SARS) has raised assessments worth R600m in the past financial year, following onsite inspections and audits of noncompliant businesses.

SARS has also warned that criminal investigations will be instituted in cases where there is evidence of "gross negligence" or "intentional tax invasion".

A new focused approach to combat noncompliance in high-risk sectors was launched in December last year, which included the cash and carry sector.

The approach entailed random onsite inspections to check for under-declarations, nonregistration and filing noncompliance.

The South African Institute of Tax Professionals (SAIT) says the focus on the cash and carry sector is long overdue.

It is also consistent with recent statements by SARS commissioner Tom Moyane that the tax base must be expanded.

South African Institute of Tax Professionals CEO Keith Engel says there are a number of sizeable mid-tier businesses that are evading tax by having a dual set of books and by operating in undisclosed cash.

"Many compliant taxpayers have complained over the years that too much focus has been made on the compliant who file their forms and information as required and not enough on outright evaders."

"We support any effort to bring more forensic audit and other resources to bear so that these outright evaders are fully brought into the system," says Engel.

SARS conducted about 140 onsite inspections at cash and carry businesses in Gauteng in April. It found at least half of these businesses to be noncompliant with regard to registration, filing or payment.

"There is a significant risk of under-declaration due to poor record keeping and high volumes of cash transactions in this sector," SARS said in an earlier statement.

PwC tax partner Kyle Mandy says these businesses face potential understatement penalties of up to 200% of the tax payable when they are found to have engaged in intentional tax evasion.

"On top of this, any person who is guilty of tax evasion or assists another person in evading tax may face criminal charges and a potential prison sentence of up to five years," he says.

Mandy adds that the voluntary disclosure programme is available to taxpayers to remedy their noncompliance. This can reduce the potential understatement penalties to a maximum of 10%. It also removes the threat of criminal sanction.

However, the voluntary disclosure must be done before the taxpayer is informed of an audit or investigation, he says.

SARS says most of the companies that were subject to onsite inspections were not registered for pay-as-you-earn (PAYE).

"However there are reasons why they might not be registered and work is going on to establish if indeed they should or should not register for PAYE."

SARS found that although companies register for income tax, they do not submit returns or they submit returns but under-declare their tax liabilities.

High risk areas that have been identified in the SARS strategic plan 2015-16-2019-20 include large businesses and transfer pricing, high-net individuals and their trusts, small businesses, tax practitioners, illicit cigarettes, the construction industry, and the clothing and textiles industry.

SARS says in its plan it aims to increase compliance of specific target groups, but it wants to balance compliance with the principle of equity.

One area that has consistently been mentioned is small businesses. Mandy says some progress has been made to ease the tax compliance burden of smaller companies.

"The biggest tax burden that small business faces is not the taxes for which they are liable, but the complexity and time associated with complying with their obligations."

He says far more needs to be done to simplify compliance for small business. The Davis Tax Committee’s next report on small and medium-sized enterprises is expected shortly.

"Hopefully, this will provide some sound recommendations on how SARS and National Treasury can further ease the compliance burden for small business," says Mandy.

In its strategic plan, SARS tries to "align" its processes, tools and organisational structure to address the needs of small businesses.

SARS says in terms of the cash and carry sector noncompliant companies are being assisted with the registration process, outstanding returns and the collection of outstanding debt.

Further risk profiling for full audits where there is evidence of under-declaration and the collection of outstanding debt continues.