SARS goes after these taxpayers in South Africa

The South African Revenue Authority has declared a statement of intent to improve voluntary compliance for high net worth individuals in the country, having established a dedicated HWI unit in 2021.

And a presentation from the head of the Revenue Service’s HWI unit confirmed the wealthy taxpayers targeted by the service. Director Natasha Singh said her unit focuses on individuals with gross assets worth R75 million.

Singh was speaking at an event last week, organized by the South African Institute of Taxation in conjunction with Tax Consulting SA and Standard Bank. She said SARS targets wealthy people in South Africa and the legality of certain offshore structures.

The unit has a permanent staff of 55 people, with plans to increase this number in the short and medium term, including a multidisciplinary team specialized in wealth structuring and the use of securitization vehicles, trusts, actions, structures and instruments.

According to Jashwin Baijoo, Legal Manager for Africa Tax & Compliance at Tax Consulting, SARS has stated unequivocally that the new unit’s strategic objective is to ‘detect non-compliant HWI taxpayers and make non-compliance difficult and costly‘.

“The lack of subtlety here proves that taxpayers face a confident and strengthened tax authority that will not hesitate to impose life-changing penalties on willfully non-compliant taxpayers,” he said.

Baijoo said SARS is making good use of South Africa’s position as a member of the OECD – it subscribes to voluntary exchange of information to gain open access to all taxpayers’ financial information. a number of financial and legal bodies, including the Master’s Office, CIPC, and banks.

Targeted approach

In early 2022, the SARS HWI unit selected 1,500 high net worth individuals and their related entities for investigation; however, he says he now wants to expand his reach to include more individuals and families.

The tax collector has proposed that all provisional taxpayers with assets over R50 million be required to declare specific assets and liabilities at market value in their 2023 returns.

The tax authority has previously said it will also target non-compliant wealthy taxpayers with offshore assets. It has made significant efforts to tackle taxpayers with unexplained sources of wealth and has strengthened its systems and audit capacity to get these people and entities out.

However, earlier in August, SARS Commissioner Edward Kieswetter said that despite its increased capacity, the revenue department is still crippled by regulations.

He said the tax service could use algorithms to investigate information about assets, vehicles and beneficial owners – identifying cases of unexplained wealth – but it is limited in that it can only run tax audits and cannot lead a “fishing expedition” to dig deeper.

Kieswetter said South Africa could pass new laws – like those in the UK – that could compel an individual to reveal the sources of their unexplained wealth. Such laws could allow for further investigation, he said.

The change could also help corruption watchdogs such as the National Prosecuting Authority, the Hawks, the Financial Intelligence Center and the Financial Sector Conduct Authority, he said.

President Cyril Ramaphosa said on Monday he supports SARS’ investigative capabilities, particularly in carrying out lifestyle audits on people with unexplained wealth.

He noted that over the past year, SARS has carried out 25 lifestyle audits worth more than R450 million to address discrepancies between reported income and a person’s lifestyle. individual.

Read: Proposed changes to how alcohol is taxed in South Africa

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