SARS targets first group of wealthy taxpayers – what you should know

SARS’ high wealth individual taxpayers unit is up and running – and as promised, the revenue collector has sent out the first batch of ‘welcome letters’ to those who meet the criteria to be part of this elite club.

In the welcome letter, SARS confirms that the recipient will be assigned a dedicated relationship manager to oversee their profile, who will serve as their direct point of contact.

“Seemingly, the unit will operate in a similar fashion to the large business centre, almost like having a private banker for your tax affairs,” said Jean du Toit, head of Tax Technical at Tax Consulting SA.

While some South Africans will be nervous about increased targeting from SARS, du Toit said that depending on your point of view, falling under the jurisdiction of the unit could be a godsend.

“Others may see the notice as dooming, although it is phrased in the spirit of collaboration. Perhaps, unless you have something to hide, your experience with SARS may vastly improve.”

SARS also promises that the unit’s service offering will be informed by “global best practice”, to ensure it delivers on its mandate.

“This is encouraging, or unnerving, depending on who you ask. It serves to note that while the unit aims to excel in its service delivery, it has been established primarily to enhance compliance among and increase collections from this segment of the tax base.”

International best practice

The standard of ‘global best practice’ is undefined and it may be interesting to know which revenue authority’s model SARS will look to replicate, said du Toit.

“In the UK, the HNWI unit also uses a single point of contact for every taxpayer, translating to a higher level of service and scrutiny. This division comprises specialist teams and has had relative success in improving collections.”

Du Toit said that the same unit of the Australian tax office uses a risk-based management approach where high net worth individuals are identified and scrutinised according to the risk they pose to the tax system.

He added that the US Internal Revenue Service “wealth squad” adopts a holistic approach to taxpayer profiles, looking at taxpayers’ earnings, the enterprises they control and any other interests they may have, locally and abroad.

SARS may take another page from its US counterpart; the IRS has a whistleblower office that rewards informants who provide information on tax non-compliance, which has proven useful in complex tax evasion cases, he said.

“Time will tell how the unit within SARS will conduct its business. We know that former judge Dennis Davis will be actively involved with the unit and based on his comments, lifestyle audits will form an important part of their strategy.

“Ultimately, however, the success of the unit will depend on its resources. Hopefully, SARS managed to attract the necessary talent in its recruitment drive to stock the unit sufficiently.”

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SARS targets first group of wealthy taxpayers – what you should know