There is a significant disconnect between the lifestyle that some South Africans are leading and how much they pay in tax, says South African Revenue Service (SARS) commissioner Edward Kieswetter.
Speaking to radio station 702, Kieswetter said that it was clear that some people had come into money ‘too soon’ and were eager to ‘display their wealth’.
“So we look at the disconnect between the people who display this wealth, which is clearly unexplained, as well as what they have declared [to SARS]. Last year we completed 25 lifestyle audits to the value of over R450 million where there is clearly a disconnect between them. Many of them were approached and owned up without much of a fight.
“We also had 33 instances where luxury vehicles are owned by people who have either not declared any income or have declared income that does not match their expensive vehicles.”
Lifestyle audits mainly involve individuals where lifestyle does not match tax declarations. Usually, capital reconciliations and the use of third-party data are considered in determining the correct declaration amounts.
Kieswetter said the focus is on individuals that have access to luxury assets and extensive business relations.
The SARS chief said the issue of tax avoidance was not limited to personal taxpayers, but that several religious institutions had also been flagged. He added that almost R750 million in assets have been connected to religious leaders who use their churches for self-enrichment or misrepresent their income – and often their lifestyle is not that of a priest or minister.
“Unfortunately our society is thick with corruption and abuse, and we have to be alive to that.”
Tax experts have indicated that SARS is increasingly turning to third-party sources such as social media to see how people are spending.
With substantial third-party data at its disposal, SARS can view anything from your new yacht to credit card transactions and foreign investments, says specialist advisory firm Tax Consulting SA.
The firm noted that social media is an incredibly rich source of information, which means it’s not advisable to show off your new sports car or crypto gains while owing money to SARS.
The consequences of a lifestyle audit can severely impact your relationship with SARS if irregularities come to light. If you suspect you are not fully compliant, it is wise to disclose your earnings and, if necessary, seek relief through the Voluntary Disclosure Programme (VDP).
If SARS decides to audit your lifestyle, the VDP window is no longer an option – even after being notified of a possible audit, said Tax Consulting SA.