SARS is sending letters to C-level executives in South Africa – here’s what it says

The South African Revenue Service (SARS) has started sending out letters to C-level executives in the country as a welcome and introduction to the tax collector’s new High Wealth Individual Unit.

The letter, seen by Tax Consulting South Africa, not only provides an overview of the unit’s purpose and function but also assigns dedicated service consultants and a relationship manager to the country’s wealthiest.

The note specifically states that:

“The focus of the HWI Unit is to build a partnership with high wealth individual taxpayers, based on mutual trust, transparency, service, and voluntary compliance.

We want to make it easy for you to comply with your tax obligations, provide clarity and certainty regarding your tax affairs, and ensure that service queries are finalised timeously.”

Jashwin Baijoo, a legal manager for Africa tax and compliance at Tax Consulting, said that SARS appears to be taking the approach of ‘positive reinforcement’ when it comes to wealthy individuals – but what the taxman says and what the taxman does may not line up.

The tax expert said that SARS’ focus on wealthy individuals – along with recent murmurings from the ANC about a wealth tax – may be sending messages to this demographic that are incongruent with its warm welcome.

On one hand, it is telling the country’s wealthiest that it has experts on hand to help them with their tax affairs. On the other, it is pushing compliance and bearing down on the same group.

“What SARS has opted to do… is more stringently focus on the non-compliance of this small number of South African taxpayers, imposing heavier burdens of compliance, in an attempt to fill the ever-present deficit to the fiscus,” Baijoo said.

“The focus here lies on net assets and liabilities and includes taxpayers who have left the country but continue to have South African interests – who for many years, believed certain aspects of their wealth were ‘tax-free’ so to speak, due to being located offshore.”

Baijoo said that this misconception is fast being remedied by SARS, who, together with external jurisdictions – which have an intersection of interests for specific taxpayers – may now perform a dual-audit or abide by the obligation imposed by the automatic exchange of information protocols.

“While we do note that wealthy individuals generally do have more complex tax affairs, which in most cases do require the attention of a tax practitioner or specialist in the field, this is not always the case. An earlier ‘Request for Documents’ issued by the HWIU places a key focus on non-compliance and the severity with which such will be treated,” he said.

In contrast to the recent welcome note, it appears SARS’ is yet to decide if they will be using the carrot, or the stick, with these very wealthy individuals, Baijoo said.

“While this may be considered quite standard by the revenue authority, taxpayers may feel some concern when receiving any correspondence from SARS.”

The tax expert said that the increased focus on the wealthy is simply the next move in SARS’ revenue collection strategy, which they have, over the preceding years, implemented more forcibly than ever before.

“Like all strategic movers, SARS has been biding their time, focusing on the most prevalent and usually highest debts.

“SARS has been consistently increasing the pressure of its collection measures, with final demands being sent out like mass-mailers, and the follow-throughs on non-responsiveness becoming more drastic, by means of 3rd party appointments or Sheriff’s attachment in lieu of the outstanding amount,” he said.

Baijoo warned that now is not the time to flaunt wealth that has not been declared to the revenue authority, but rather, irrespective of how wealthy you may be, move proactively to a stronger position, arising from full disclosure and a clean compliance record.

“In order to protect yourself and your assets from SARS, it remains the best strategy that you always ensure pro-active compliance. Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory, ensuring you don’t get shot down for what could be the smallest of mistakes.

“However, where things do go wrong, SARS must be engaged legally,” he said.

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