SARS has a new target in South Africa

 ·28 May 2024

The South African Revenue Service (SARS) is ramping up its compliance efforts with high-net-worth individuals (HWIs) in South Africa and launching a fresh volley of notices targeting small and medium businesses (SMMEs).

According to tax experts at Tax Consulting SA, Jashwin Baijoo, Head of Strategic Engagement and Compliance and Michelle Phillips, Tax Attorney, the revenue service has intensified its compliance focus on both SMMEs and HWIs, using its updated technology and data-driven insights derived from both local and international sources – looking in every nook and cranny for cases of non-compliance.

While the focus on HWIs has been ongoing for some time, SARS is still pilot-testing its “SMME Compliance Programme,” which Tax Consulting said is now at about 80% completion.

This programme has the goal of correcting non-compliant behaviour amongst SMMEs proactively, it said.

“This dual-target strategy underscores SARS’s battle plan for one of the five ‘must-win battles,’ which is to ‘Improve voluntary compliance and fiscal citizenship’,” the group said.

This was underlined by finance minister Enoch Godongwana this year, who made it clear that one of the biggest challenges for SARS is tax compliance – ie, the service cannot collect revenue it doesn’t know about.

Recent statistics show that these intensified efforts by SARS are paying off.

Gross Revenue Collections exceeded R2 trillion in 2023. Viewing SMMEs in isolation, their contributory portion has surged to R466.8 billion, a notable 10% increase year-on-year, Tax Consulting said.

“Despite these gains, the sector still grapples with low levels of voluntary compliance, evidenced by subpar filing rates and widespread under-declarations.

“SARS has highlighted the need for enhanced education and enforcement measures, working closely with other government institutions to improve compliance rates within this segment, which currently accounts for 28% of total revenue collection,” it said.

On the other end of the spectrum, the HWI segment has also seen increased scrutiny.

SARS has successfully migrated 4,000 individuals to the high-wealth division, with plans to expand this to include an additional 58,000 taxpayers and related entities. This segment has shown a revenue contribution of R12.5 billion.

Tax Consulting warned that SARS’ ramped-up pursuit shows that no taxpayer, regardless of their economic standing, is beyond the reach of the taxman’s compliance efforts.

“Recent compliance trends have also shown SARS considering not just current compliance, but also deep-diving into historic risks of non-compliance, and in some instances, even requesting taxpayers to look into their crystal balls and provide SARS of income and expenditure estimates for future tax periods.”

Read: SARS keeping an eye on international travel and high-end vehicles

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