SARS is coming after these wealthy taxpayers and businesses
The South African Revenue Service’s (SARS) crackdown on wealthy taxpayers, as well as certain businesses, is paying off and showing no sign of slowing down.
Speaking on the reported revenue outcomes for the tax authority, the SARS commissioner Edward Kieswetter said that the two newly introduced segments of investigation – namely, the high wealth individuals (HWI) and tax-exempt institutions – will be looked into even more deeply.
According to the commissioner, the revenue contributions from HWI were R11 billion. He added that SARS is now laying the foundation to step up its effort in this segment of the tax base, which at present includes 58,000 taxpayers, excluding related entities.
On top of this, SARS collected R14.9 billion from over 65,000 entities, including non-profit and public benefit organisations.
He said that the level of abuse and low compliance in the area of tax-exempt institutions remains a huge concern for SARS, and as a result, it aims to step up its focus.
Expanding further on the cases of non-compliance regarding HWI, through improved data collection systems as well as advancements in artificial intelligence integration, SARS was able to detect HWI cases for in-depth audits.
The tax authority currently uses Common Reporting Standards (CRS) data and data obtained from other countries to match against the income tax declarations made by taxpayers in order to detect mismatches.
“Of these, we identified risks in 26 taxpayer cases (40% of the population tested). The values of these anomalies (where interest could not be matched to a taxpayer declaration) amounts to R445 million,” said Kieswetter.
“In addition, 18 taxpayer cases (28% of the population tested) have been routed to Audit with estimated tax results amounting to R105 million, while another 15 cases from the 18 are under investigation. Three cases are at the letter of findings stage, with possible additional assessments amounting to R79 million,” he added.
An increased focus on HWI forms part of the institution’s long-term plan to push towards ensuring tax compliance.
Speaking on the revenue services outlook for 2023, the head of strategic engagement and compliance at Tax Consulting SA, Jashwin Baijoo, said that the tax authority is taking a zero-tolerance approach to HWIs.
“It almost seems as though the revenue authority was merely warming up in 2021 and 2022, with the real heat being brought in 2023,” said Baijoo.
In 2021, SARS reestablished the HWI Unit, with the primary mandate of investigating wealthy individuals and detecting non-compliance by assigning managers to assist with their tax compliance.
Edward Kieswetter said that other significant themes that are of concern for the tax authority and audit focus involve:
- The abuse of employment tax incentives (ETI) schemes
- Companies not ringfencing their assessed losses in line with legislation
- Second-hand gold businesses abuse of the VAT system
- Stock write-offs and impairments
- Mining capex
Despite a handful of segments still requiring deeper investigations, SARS announced record revenue collections on 3 April.
The taxman collected just over R2 trillion in gross tax revenue, the first time it has broken the R2 trillion ceiling.
After paying out R381 billion in refunds, the net collection amounted to R1.68 trillion. This gross amount was the highest ever recorded by SARS, and the refunds paid out were also the largest in the organization’s history.
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