SARS is cracking down on these professionals in South Africa
There has been an increase in the South African Revenue Service (SARS) threatening financial professionals with de-registration, says Jashwin Baijoo, the head of strategic engagement and compliance.
According to Baijoo, financing professionals, including tax practitioners, accountants, and specialist attorneys, are not completely able to evade jail time even with Professional Indemnity Insurance.
The tax consultant said that in light of the taxman’s compliance drive, the threats are twofold.
It raises questions about how a finance professional can advise a client while their own finances are not in order, and, if there is validity to a SARS claim, how the non-compliant practitioner would generate the necessary income to settle the historic debt.
The new move indicates that SARS is no longer willing to just target the ‘low hanging fruit’, said Baijoo.
The recent case involving billionaire Christo Wiese has set the tone for SARS taking on wealthier and more influential business people.
SARS commissioner Edward Kieswetter, like all strategic movers, has bided his time well, taking out a number of pawns before moving in on a King; this judgement, if gone without appeal, will serve to set a formidable precedent, bolstering SARS’ audit and prosecution capabilities even further, said Baijoo.
“What is a point of interest in this matter is the alleged involvement of Africa’s largest law firm, Edward Nathan Sonnenberg (ENS), former executive Gert Viljoen.”
“We have historically seen a number of law firms finding themselves in similar but far less damning situations due to not fully considering the possible tax ramifications when issuing advice to wealthy or affluent clients, especially when it comes to offshore structuring.”
It appears that SARS has its sights set on shrewd financial advisors together with their non-compliant clients.
SARS has the backing
With the 2023 Budget Speech around the corner, Tax Consulting SA noted that many of the proposed developments to South African law from the 2022 budget – including tax rate changes, increased excise charges, and most relevantly, SARS’ focus on the eradication of non-compliance and fraud – have been implemented.
This shows that it’s not just talk coming from the tax collector and that it has the backing of the presidency, and National Prosecuting Authority when it comes to pursuing its mandate.
In 2022 it was stated that:
“To assist with the detection of non‐compliance or fraud through the existence of unexplained wealth, it is proposed that all provisional taxpayers with assets above R50 million be required to declare specified assets and liabilities at market values in their 2023 tax returns.
“The additional information will also help determine wealth holdings’ levels and structure as recommended by the Davis Tax Committee.”
According to Baijoo, this aligns with Kieswetter’s statement pre-dating the speech in April 2021, noting that SARS has profiled a number of High-Net-Worth Individuals, who the revenue authority deems to be living beyond their means, with a focus on specified assets and liabilities, with a market value exceeding R50 million rand, or R75 million, in practice.
Speaking in a PSG Think Big webinar this week, Kieswetter said that SARS doesn’t target any particular group subjectively, but follows the data and risk profiles it has been building over the years.
He said that the revenue service’s actions are objective and data-driven, using machine learning and AI algorithms to determine who to “target”.
The process is determined by risk profiles – and the group has been tapping into various data sources, both local and global, to get as much data and information on taxpayers to build these profiles.
If your tax affairs align with the groups that the algorithms determine are at high risk for non-compliance, chances are you will come under further scrutiny.
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