South African Revenue Service (SARS) commissioner Edward Kieswetter has warned non-compliant taxpayers and traders that the revenue authority will not tolerate any transgressions of tax and customs laws.
The revenue service is ready to act firmly and professionally with those that engage in these practices, he said, adding that SARS is ‘enhancing its capability’ to detect and make it costly for those who are determined to be non-compliant.
“Tax crime is not a victimless crime. It directly affects the poorest of the poor who are dependent on basic services including the social security safety net for old age pensioners, child grants and for tertiary education support targeting needy students as well as providing health services, among others.
“SARS is, therefore, determined to enforce the tax and customs laws of the country without fear or favour in a responsible manner when all other legal avenues have been exhausted.
“We want to remind taxpayers and traders to talk to SARS, before we come to talk to you.”
Kieswetter highlighted enforcement actions across various industries and type of offences, including VAT fraud amounting to R5 billion, an understatement in income tax declarations amounting to R4 billion, as well as custom offences.
He added that SARS is determined to claw back any tax liability from income that may have been derived from alleged criminal activity.
Fuel and tobacco
Kieswetter said that much of the revenue service’s recent focus has been o the fuel and tobacco industry.
“We are investigating fuel refund claims of over R1-billion from major licensed distributors and, where instances of serious non-compliance have been identified, we have handed over the information to the National Prosecuting Authority (NPA),” he said.
With regard to the tobacco sector, SARS has raised assessments to the value of R60.8-million, of which R32.5-million has been collected. Over the past several months SARS has effectively seized over six containers of cigarettes that have been falsely declared.
“We have proactively deployed dedicated personnel at the cigarette manufacturers’ facilities to monitor the local production process and the volumes being distributed, allowing SARS to gain better insight into the working of the value chain and the import and exports of all tobacco products.”
Kieswetter said that significant revenue also leaves South Africa every year in the form of intra-group services linked to multinational enterprises (MNEs).
“Through such transfer pricing some MNEs engage in aggressive tax planning to create a disconnect between the local activities which give rise to profits and then declare these profits in tax jurisdiction with lower tax rates.”
He said that there is a risk that these payments will continue to reduce the sovereign tax base of South Africa to the extent that they are not services that a third party would contract for and/or do not reflect an arm’s length price for the services that have been rendered.
“The next step will be risk-profiling cases, including an automated transfer pricing risk assessment, selecting cases for in-depth auditing and taking criminal action against taxpayers that have failed to comply with our request for information.”