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Penalties and Surcharges

Our revenue system relies on taxpayers and employers providing correct information to establish their tax and contributing liability under the law and paying the correct amount of tax and contribution.

Sometimes taxpayers fail to correctly report an amount they are required to or do not meet other tax or contribution obligations. Taxpayers who fail to meet their tax obligations may be liable to penalties or surcharges. When we find an error or omission, we take into account the relevant individual circumstances, including your compliance history, when deciding what action to take, particularly in relation to any penalties or possible prosecution action. These circumstances include the reasons resulting in the error or omission and how well the taxpayer has complied with their tax obligations in the past. We also consider the taxpayer’s attitude towards complying with the tax laws.

Types of penalties
A penalty or surcharge is an amount that is calculated in accordance with the relevant legislation. As opposed to offences, penalties and surcharges are administrative in nature and do not require a Court decision.

Follow the links below for more information about specific penalties and surcharges.

Remission of penalties and waiving of surcharges
In determining the remission of penalties and waiving of surcharges, we look at 2 main factors:
  • The monetary cost of the outstanding debt (the interest component). This is based on the fact that if taxpayers do not pay their tax liability in time, the Government is required to source its funds from alternative sources at a cost. For example, issuing bonds
  • Discouraging taxpayers from doing the wrong thing (the punitive component). If a taxpayer does not abide by the law (particularly on purpose and repeatedly) then the SRC needs to send out a strong message. Non-complying taxpayers create an unfair competitive advantage for themselves and increase the overall tax burden on society
The interest component of the penalty or surcharge is in place to ensure that while a taxpayer has a tax or contribution liability, he does not profit from it. For example, having the same liability with a bank would involve interest charges. The interest component is only waived in extremely limited circumstances such as where you followed our written advice or if the debt is based on a contentious issue.

We also need to discourage those taxpayers who purposely or recklessly do not meet their tax or contribution obligations. Therefore, our remission and waiving strategy is also based on the taxpayer’s compliance behaviour. We will be lenient to those who made an honest mistake as opposed to those that evade tax deliberately. See Compliance Behaviour Explained for more details.

Know more about
Exchange Of Information
Self-Assessment for Business Tax
The Self-Assessment System – Assessing your own tax liabilities
Value Added Tax
The Tax and Customs Agent Board (TACAB)
Lodgment of Partnership Business Tax Return
Read More>>
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