5.2.1 To explore the nature of personal income tax fraud in Durban
This objective was comprehensively addressed in an attempt to understand the nature of income tax fraud as a predominantly white-collar crime in Durban. In essence, the SAPS DPCI in Durban should be equipped to respond effectively and efficiently to personal income tax fraud.
To this end, a comprehensive response plan to respond effectively and speedily to fraudulent E- filing procedures in Durban should be developed as a matter of urgency. Moreover, all relevant stakeholders namely SARS personnel, relevant SAPS DPCI and NPA DPP STU officials and the taxpayer community should work together in the fight against income tax crimes, which seem to be in their infancy phase and might spiral out of control if not curbed as soon as possible. It was shown that current actions in relation to the commission of this crime are underreported. For this reason, the mandate of SAPS DPCI officials who investigate these cases remains invaluable, and they should be fully supported by an effective legal framework, sufficient personnel provisioning, and a sound information base to render their efforts successful.
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The investigators attached to SAPS DPCI in Durban should take note that each fraud case is different and requires unique methods of investigation to manage their response plans, minimise the associated risks, and maximise their potential for the successful investigation of this crime.
This simply covers the reporting channels, a quick response team, and action plans, among others.
5.2.2 To analyse the extent of personal income tax fraud in Durban
In evaluating the extent of personal income tax fraud in Durban, it was found that this crime is more widespread than was anticipated and that it is reaching increasingly higher levels across South Africa, with specific reference to Durban. The factor that was predominantly blamed for this spiralling phenomenon was technological advancement, with specific reference to the recently introduced E-filing system for income tax returns. Therefore internet usage and accessibility, coupled with the work of ruthless ‘tax consultants’ and taxpayers, remains problematic at this point.
This problems reinforces the need for the SAPS DPCI in Durban to be better equipped in order to gather evidence of the commission of this crime in digital format. They should able to prepare and address a myriad issues related to the examination of both physical and digital evidence.
This requires specialised forensic experts’ efforts and computer forensic investigations of financial records to maintain a proper chain of custody. Initial assessments should be conducted to determine sources of information, and key evidence should be reviewed as a matter of course to timeously expose physical and digital evidence of fraud.
5.2.3 To determine the modus operandi of perpetrators who commit personal income tax fraud in Durban
To achieve this objective, the participants were asked to share their experiences of the MO in the commission of this crime. The fraudulent completion of E-filing data lead the list. It was also revealed that poor, unwitting individuals are targeted and exploited as they have limited knowledge of how SARS operates. The participants mentioned other diverse actions that lead to this crime, such as false claims.
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Poverty among the general population was also highlighted as a driver to commit income tax fraud, not necessarily because the public has criminal tendencies, but as many people need extra cash flow to survive and they see SARS as depriving them of their vital financial resources. This perception is exacerbated when the public perceives that the government fails to apply their hard- earned money in a transparent and fair manner.
It was suggested that the SAPS DPCI in Durban should clearly understand that this crime can be committed in several ways, as was mentioned supra. Therefore auditing and monitoring procedures, which simply relate to management reviews by this Unit in collaboration with other relevant stakeholders (i.e., SARS, the NPA DPP STU and taxpayers), should stage more regular internal audits. This should be done by obtaining physical and digital evidence, reports, and testimonies of investigation findings that will assist in personal income tax fraud detection and prevention. In this context, it is vital that an effective and in-depth understanding of the MO of tax fraud perpetrators is imparted through ongoing training and information sessions. The digital world is advancing at an unprecedented pace, and it is vital that tax fraud investigators and prosecutors keep abreast with these developments and MO.
5.2.4 To evaluate the obstacles/challenges that hamper the effective investigation of personal income tax fraud in Durban
This study objective received insufficient coverage. It was revealed that the challenges experienced by the Durban SAPS DPCI and the NPA DPP STU in Durban were more severe than had been anticipated by the researcher. This seemed to be exacerbated by an ineffective relationship between the SAPS DPCI and SARS. The SARS officials were blamed for not providing detailed information to SAPS officials to respond effectively to this crime. The main problem was ascribed to the E-filing tax return system, which is a barrier in detecting IP addressed and the traceability of other taxpayers. It was also strongly suggested that the Department of Justice and Constitutional Development (DoJ & CD) contributes to the problem by issuing fines to income tax fraud perpetrators instead of stiffer sentences that will land them in jail. It was surmised that the perpetrators of this crime are generally affluent white-collar citizens who have access to huge financial resources, whether legally or illegally obtained.
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Therefore, a mere fine will not deter these people from committing income tax fraud in the future – in fact, they may devise more effective and devious methods to defraud SARS and law-abiding citizens.
To address these challenges associated with the investigation of personal income tax fraud in Durban, the SAPS DPCI should conduct fragment fraud examinations in collaboration with relevant stakeholders (i.e., SARS officials and taxpayers). This should help in identifying improper conduct by taxpayers to stop the commission of this crime in Durban, help in the facilitation of recovering losses, mitigate other potential consequences, and strengthen internal control weaknesses in other relevant organisations, among others.
5.2.5 To determine how personal income tax fraud can be prevented in Durban
This study found that personal income tax fraud in Durban can be curbed mainly by focusing on revisiting the E-filing system to prevent the submission of false claims and the detection thereof should this occur. The system, which can easily trace tax return histories, will obviously help in determining current criminal tax evasion trends, which in turn will inform investigators of MO that can be detected and exposed. The SAPS DPCI and NPA DPP STU in Durban should therefore work closely and collaboratively with SARS officials and relevant taxpayers to achieve this.
To this end, income tax fraud investigations in Durban should be integrated with forensic accounting strategies that should be implemented by the SAPS DPCI, the NPA DPP STU and SARS. These functions should be applied in this province holistically as most investigations generally fall under this category, including fraud examinations, investigations and reporting for both civil and criminal cases.
It was noteworthy that some respondents mentioned that they had already visited institutions such as schools where they launched information and awareness programmes to sensitise the public in terms of income tax and other related issues. These initiatives should be extended. The mass media such as newspapers, magazines, flyers, and television programmes should be harnessed creatively to bring their message across.
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