The understatement penalty ("USP")
regime introduced by the South African Revenue Service
("SARS") in terms of the Tax
Administration Act, No 28 of 2011 (the
"TAA"), which is still in its infancy
stages, has led to some uncertainty as to when an USP should,
veritably, be levied by SARS. An "understatement" is
defined in section 221 of the TAA to mean "any prejudice to
SARS or the fiscus as a result of –
- a default in rendering a return;
- an omission from a return;
- an incorrect statement in a return;
or
- if no return is required, the failure
to pay the correct amount of 'tax'."
With the enactment of the TAA, it was envisaged by SARS that the
USP regime would be a prime means of safeguarding itself with an
arsenal of extensive financial sanctions in a bid to punish errant
taxpayers whose actions result in any of the four aforementioned
misdemeanours. The levying of an USP, which is predicated on the
taxpayer's behaviour, ranges from a mere ten percent to
