BRIBES, PENALTIES, AND FINES: DON'T EXPECT HELP FROM SARS

Deductions are disallowed under Section 23(0)-but it's not quite cut and dried...

- STEVEN JONES

THE MEETING went on longer than you expected, and now you're rushing to get to your next appointment. It's a new client, and a successful deal will be lucrative both for your company and this month's commission cheque. But not five minutes after you get onto the freeway, some plod with a hairdryer in his hand is waving you over to tell you what your speedometer already knows if only you'd bothered to look.

Then the next day your boss comes into your office, informing you that your territory has been extended to include the neighbouring countries as well. The opportunity is great, but on your first visit outside of the country, all the rumours about border post delays are confirmed in graphic detail. To add insult to injury, your product samples are attracting a bit too much information from the man at Customs, so you decide to slip him a hundred bucks rather than risk any further delay.

In the meantime, you've been so busy that you forgot all about your income tax return that has been due for the past year. Unfortunately, since the South African Revenue Service (SARS) does not like being delayed any more than you do, they slap a penalty on you for a late submission.

Deciding to turn over a new leaf, you hire an accountant to do your taxes. In amongst your pile of vouchers, you include the traffic fine, your note about the payoff to the customs official, and the SARS penalty notice. However, the accountant does not include any of these as deductions in your income tax return. Exasperated, you get on the 'phone and fire your accountant on the spot.

But is this justified? As it turns out, the accountant is only doing their job. The fact is that none of these so-called 'expenses' are deductible against your taxable income. Section 23(o) specifically prohibits the deduction of any expenditure incurred in respect of "corruption or a corrupt activity, or a fine or penalty imposed as a result of an unlawful activity".