SARS is coming after South Africa’s rich – as they try to rush billions out of the country

The South African Revenue Service (SARS) intends to ‘follow the money’, with High Wealth (HW) Individuals and Multi-National Enterprises (MNE) in the taxman’s crosshairs.

SARS’ compliance revenue programme has added R293.7 billion to the state’s coffers, but Commissioner Edward Kieswetter said that SARS would be “a catalyst to a more efficient and effective economy” through its tax administration, underscored by the voluntary compliance push.

Jashwin Baijoo from Tax Consulting SA said that the SARS intends to be the “catalyst” by targeting the big-ticket taxpayers – HW Individuals and MNEs – as their non-compliance can translate to billions of rands in revenue being lost.

“The success of SARS’ clamp-down on non-compliance cannot be disputed, especially in extreme cases with high-profile taxpayers – setting an example to the nation,” said Baijoo.

“With the current focus on HW Individuals and MNEs, together with their trusted advisors, being taxpayers in their own right, the goal for 2024/25 remains the same – to maximise revenue collections.”

“As a strategic mover, Kieswetter’s strategic initiatives, such as the creation of the High-Wealth Individual Unit and insertion into the law of Advanced Pricing Agreements, have served to bolster SARS’ reach and capacity, which is the bane of existence for non-compliant affluent or MNE taxpayers.”

High Wealth

HW Individuals use elaborate offshore structures and multi-layered investments to optimise their taxes whilst preserving their wealth.

Although the revenue collected from this segment stood at R12.5 billion last year, SARS will not let that number diminish.

The introduction of the High Wealth Individual Unit and the implementation of the Approval for International Transfer (AIT) process highlighted SARS’ efforts to sink its claws deeper into the rich.

“Even though SARS has noted a decline in High-Wealth Emigration applications, this is not to say that South Africans are not looking at alternate ways to optimise their tax affairs, including offshore investments,” said Baijoo.

“Kieswetter has confirmed that SARS saw AIT applications to the tune of R13.6 billion for the last reporting period and only approved R7 billion.”

Delays for applications are often due to ill-advised or ill-gotten gains, with SARS stating that applicants must have their affairs in order before making an application as it will trigger a risk review.

MNEs

Although MNEs are familiar with international transactions, many still do not adhere to international tax laws, especially pertaining to base erosion and profit shifting (AKA Transfer Pricing).

“Although the ‘arm’s length principle’, and Transfer Pricing specific Articles, are well-established international principles of the Organisation for Economic Co-operation and Development, many MNEs find themselves facing Transfer Pricing Audits on a regular basis.”

“Practically, this stems predominantly from failing to establish the correct tax and legal foundation to support the commerciality and profitability of’ ‘affected transactions’ between companies under common control.”

Although many believe that SARS lacks the technical Transfer Pricing expertise to conduct there’s audits, it still collected R36.6 billion from 31 Transfer Pricing Audits, 5 International Audits and 8 Integrated Audits.

SARS has strengthened its tax treatment on all international transfers through AI data-driven processes and the outsourcing of specific functions

Baijoo said this has created “a competent revenue authority like nothing South Africans have seen before.”

Read: Work-from-home shift could save South Africans up to R2,900 a month