SARS teams up with the US revenue service to take on tax dodgers

In an effort to enhance tax enforcement on a global scale, the South African Revenue Service (SARS) will join forces with the criminal investigation division of the United States Internal Revenue Service (IRS).

The partnership will identify, investigate and bring to justice criminals with a nexus to both countries, SARS said.

Some of the crimes under investigation include international public corruption, cyber fraud, and money laundering.

The newly formed partnership has already uncovered emerging schemes perpetrated by promoters, professional enablers, and financial institutions, it said.

“The global fight against financial crimes is not one that can be fought alone by any one country. Our partnership with the South African Revenue Service will soon reveal operational results made possible by our strong alliance and collaborative efforts,” said Guy Ficco, IRS-CI director of global operations.

“Taxpayers and tax professionals using offshore and other sophisticated schemes to evade the US and South African laws will be uncovered and prosecuted to the full extent of the law.”

Focus on the wealthy

SARS commissioner Edward Kieswetter said that the collaboration will also mean a renewed focus on non-compliant high wealth individuals and offshore holdings.

“One of our strategic objectives is to make it easy for taxpayers to comply with their tax obligations, and hard and costly for those who willfully do not comply,” he said.

“We trust that this partnership will yield results, also in terms of augmenting our internal skill sets as we clamp down on illegal activities affecting both our countries.”

A major component of the collaborative effort between the two countries includes an ongoing training initiative led by IRS-CI.

The US tax agency continuously shares financial investigative techniques, trains South African law enforcement officers and government officials and highlights adjudicated international case studies relevant to both countries.

“This partnership will undoubtedly build up SARS’ capacity to trace offshore wealth; the opportunity for SARS to rub shoulders with the IRS is an added, and much needed, bonus,” SARS said.

What it will mean for South Africans

SARS made its intentions clear in the budget speech that a focal point of its enforcement efforts will be the wealthy segment of the tax base, said specialist consultancy Tax Consulting SA.

Shortly thereafter, SARS added former judge Dennis Davis to its ranks to assist with its endeavours.

SARS also established the ‘High Wealth Individual Taxpayers Unit’ and now it allied itself with the powers of the IRS to ensure that offshore riches do not go undetected.

“It seems that SARS, as we suggested, will take a page from other revenue authorities to ensure that its efforts meet the standard of best global practice and it is clear, now more than ever, that SARS will no longer shut its eyes to offshore structures,” Tax Consulting SA said.

“Perhaps more important for SARS is the fact that this initiative creates an invaluable opportunity to upskill its workforce.”

When SARS published the results of its recruitment drive, concerns were raised on SARS’ existing resource pool and its ability to transfer the necessary skills to new recruits, Tax Consulting SA said.

It also raised questions if the recruitment drive invited applications from the desired candidates, especially as more than 15,000 applications came from individuals already employed at SARS.

“Arguably, these issues were confirmed when SARS announced, also on 6 July 2021, that it entered into a partnership with the South African Institute of Chartered Accountants (SAICA) to help build capacity at SARS, by assisting with its recruitment efforts.

“Seemingly, SARS is struggling to recruit candidates with the desired qualifications and experience, which again brings us to question the current status within the organisation.”

This is why the initiative with the IRS is so important, Tax Consulting SA said.

“It appears that SARS is not yet at the point where it will try and recruit internationally but working with and learning from experts within the IRS and other revenue authorities is not a bad consolation prize at this point.

“In fact, the media release confirmed that the IRS already had a training session with some of SARS’ enforcement officials on offshore tax evasion, which is hugely encouraging.”

There are several obstacles that SARS still need to overcome before it will be back where it needs to be, its lack of resources being in the forefront, said Tax Consulting SA.

“But through consistent effort, SARS is effecting positive change across the board and this initiative again demonstrates SARS’ commitment to achieving its vision of building a smart modern institution with integrity that is trusted and admired by all.”


Read: SARS boss’ message to taxpayers in South Africa: We will only ask nicely the first time

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SARS teams up with the US revenue service to take on tax dodgers