SARS is coming after these taxpayers hard
There are 4,057 entities and individual taxpayers who owe at least R10 million to the South African Revenue Service (SARS) – amounting to over R277.67 billion.
This was revealed by Finance Minister Enoch Godongwana in response to a question posed to him in Parliament by ActionSA’s Alan Beesley.
According to Godongwana, the total number of individuals that owe SARS amounts exceeding R10 million is 1,156.
This amount owed by these individuals sits at the value of R61,918,578,340 (including capital, interest and penalties).
Additionally, the total number of companies that owe SARS amounts exceeding R10 million is 2,901, which amounts to R215,753,739,364 (including capital, interest, and penalties).
Godongwana has often emphasised that SARS is pursuing several strategies to ensure that taxpayers understand their tax obligations and that the law is enforced where they fail to meet them.
Cracking the whip
One of the recent moves to clamp down on avoidant taxpayers is seen through tapping into the skills of private-sector tax practitioners to pursue tax dodgers and avoiders—in what experts are calling a “masterstroke” move by the commissioner.
SARS announced a new tender on 26 August to appoint a panel of specialist tax consulting firms for a period of five years.
According to Tax Consulting SA, this will give the service and commissioner Edward Kieswetter “immediate access” to the minds of private tax consultants, who will be able to give insights into tax evaders and close some gaps that may be overlooked.
This should help “catch tax evaders, tackle non-compliance, and get additional tax brainpower to deal with highly complex and sophisticated tax structures,” it said.
The number of panel members to be appointed is not yet clear, but each can submit resumes for at least 88 tax specialists, from junior to senior levels. The tender encompasses all tax types and various technical and compliance issues.
Tax Consulting noted that this will significantly help Kieswetter address his two main challenges: securing quality resources and expertise to navigate complex tax avoidance and evasion schemes.
“(These) will almost instantly be fixed,” the group said.
“The capacity of SARS to take on far more complex tax matters, including forensic audits and corporate restructures, will immediately be bolstered.
“The same tax practitioners who have for years complained about SARS not doing enough to combat aggressive tax structures punted by some firms or advisors, as well as those frustrated by widespread and blatant poor service delivery, can now join ‘team SARS’,” it said.
More notably, Tax Consulting said that the panel will give SARS more teeth.
The appointed tax practitioners will communicate with taxpayers via phone, written correspondence, and virtual meetings.
They will be authorised to raise assessments, conduct audits, and collect taxes for SARS, supporting the revenue authority’s mandate.
Prof. Keith Engel from the South African Institute of Taxation (SAIT) emphasised that private sector experience helps tax collectors know where to look and ask the right questions, which is the focus for SARS.
Tax Consulting noted that this initiative to involve specialised private sector tax consulting will increase the likelihood of detecting non-compliant taxpayers and enhance scrutiny of aggressive tax schemes.
Looking at moves to attempt to crack the whip on non-compliant companies, on August 1, 2024, National Treasury released the 2024 Draft Tax Administration Laws Amendment Bill, proposing changes to section 246 of the Tax Administration Act regarding public officers.
Under the current laws, when a company or business is established in South Africa, it has a 30-day window to appoint a public officer who becomes SARS’ point of contact to handle that company’s tax affairs.
Every company conducting business or having an office in the Republic must, at all times, be represented by an individual residing in the Republic.
The key change is to eliminate the 30-day window for appointing a public officer, requiring that one be appointed simultaneously with company formation, similar to how income tax numbers are issued.
The proposals also establish a clear hierarchy for appointing a public officer, which defaults to the following order if no appointment is made:
- Managing director or equivalent
- Financial director or equivalent
- Company Secretary
- Director or prescribed officer with the largest shareholding
- Director or prescribed officer with the longest tenure
- Senior employee according to the reporting hierarchy
If none of these individuals are suitable, SARS may appoint someone it deems appropriate.
If a public officer becomes unsuitable or ineligible, SARS can withdraw its approval, and the company must appoint a replacement within 21 business days.
While these changes aim to strengthen compliance, questions remain about how SARS will designate public officers when no eligible candidates are available.
On top of this, SARS has ramped up developments on the tech side, leaning into machine learning and artificial intelligence to streamline and automate a lot of the smaller admin tasks with filing taxes.
By widening its net of third-party data and having algorithms examine less complex tax affairs more closely, the Revenue Service has made it easier for individual taxpayers to become compliant and more difficult for would-be evaders to dodge their obligations.
This has also freed up the service’s human resources to hone their craft and focus more precisely on specific areas of tax, where billions of rands tend to slip through.
Read: FCSA coming after companies hard with almost R1 billion in fines
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