SARS is coming after these taxpayers with the big guns
Tax experts say that the South African Revenue Service (SARS) is ‘weaponising’ its tax processes to target High Wealth Individuals (HWIs) and sniff out potential non-compliance.
Tax practitioners at Tax Consulting SA said that HWIs are known for accruing their wealth “through navigation of complex, multi-layered investment structures, both locally and offshore”.
“This results in these affluent individuals having to regularly traverse intricate regulations and calculations to ensure compliance. However, recent developments indicate that the collection focus on HWIs is intensifying, with SARS employing advanced technology to streamline audits and bolster efficiency,” the group said.
This includes the SARS HWI Unit now making “relevant material” requests on provisional tax filings, which is something that was historically associated with audits or verifications.
“The HWI Unit takes it one step further, requesting not only detailed computations for return submitted, but also income and deduction forecasts for the next six months,” it said.
Tax Consulting said that SARS is using the powers afforded to it in the country’s tax laws to cast its collection net as widely as possible while also turning to AI algorithms to bolster its activities – including the focus on future taxes.
“This AI capacity-bolstering technique has already been seen across SARS’ historic audit processes, where it is used to maintain thoroughness and accuracy while deriving data-driven insights almost instantaneously,” Tax Consulting said.
“This move underscores a broader trend towards the integration of technology in tax administration, promising to revolutionize the way tax compliance is monitored and enforced.”
As a result, SARS is intensifying pressure on all taxpayers, but specifically HWIs.
“These data-driven insights inform SARS of all transactional records pertaining to specific taxpayers. Using AI, the ‘fine-tooth comb’ is no longer needed to extrapolate these records into strong legal cases for non-compliance. This collaborative approach enables SARS to gain access to a comprehensive dataset, facilitating more robust evaluations of taxpayers’ financial activities.”
“Beginning a compliance initiative with the end in mind is something SARS is known for, which may very well be the case here; by ensuring there is full disclosure of all interests, both local and foreign, gauging if a taxpayer is living beyond their means, becomes that much less onerous on the revenue authority, and more a case of capitalising on data-driven insights.”
The tax experts said that HWIs should expect heightened verification protocols from SARS, with individuals already reporting more data requests from the taxman.
“These requests, citing specific legislative provisions, highlight the meticulous scrutiny under which HWIs’ tax affairs are now placed,” they said.
“When viewed in conjunction with the Approval for International Transfer process imposed as of April 2023, being applicable for outbound fund movements, usually in large sums of money, the net is tightening on the wealthy.”
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