SARS’ Edward Kieswetter warns South Africans about dodgy tax professionals

South African Revenue Service (SARS) Commissioner Edward Kieswetter expressed his concern with non-compliance and delinquent behaviours among tax practitioners that have filtered through to their clients.

On 3 April, Kieswetter presented SARS’ revenue collections for the 2023 financial year. 

South Africa’s preliminary tax collection beat estimates despite significant growth in refunds, logistics constraints, record power outages and a faded commodity boom.

SARS collected R1.74 trillion in the fiscal year through March 31, which was about R10 billion more than projected in the February budget, representing a 3.2% increase from the 2023 fiscal year.

The higher-than-anticipated income means the budget deficit as a percentage of gross domestic product for the past fiscal year could be better than the National Treasury’s February projection of 4.9%.

When presenting the results, Kieswetter revealed a troubling trend whereby many tax practitioners are non-compliant with tax regulations. 

“We’ve identified 53 tax practitioners who remain non-compliant in their own taxes, which explains, in part, how they advise their clients and why their clients are equally delinquent,” Kieswetter said.

“In one law firm alone, in The Square in Sandton, we found 14 partners of this law firm who underestimated their own provisional taxes.”

He warned taxpayers to take care when they approach tax practitioners. 

Tax Consulting South Africa’s Darren Britz and Bronwin Richards said this revelation emphasises the crucial link between practitioner compliance and the advice they offer to clients.

They said instances like the one Kieswetter mentioned underscore the importance of holding professionals to higher compliance standards.

“SARS has initiated processes to revoke licenses from non-compliant practitioners,” they said. “To date, eight licenses have already been revoked, and further criminal investigations are underway against others found to be in breach of tax obligations.”

“At the heart of this issue lies a fundamental truth that not all tax professionals operate with integrity and compliance, both with respect to their personal tax affairs and those of their clients.”

They said Kieswetter’s observations serve as a sobering reminder of the risks associated with non-compliant tax practitioners and the repercussions of poor-quality, aggressive tax advice, which can be severe.

Fraud clampdown

In his presentation, Kieswetter also said that SARS had prevented the outflow of R101 billion in fraudulent refunds in the 2023/24 financial year.

Kieswetter said the revenue service returned R414 billion in taxpayer refunds – the highest quantum in SARS’ history. 

This is up 8.6% from the previous year and consisted largely of value-added tax (VAT) refunds, which made up R343 billion of the total.

However, the commissioner said he remains concerned about fraud surrounding South Africa’s tax regulations,

For example, Kieswetter said SARS will ramp up efforts to target lenders and advisers who may be “professional enablers” of organised corruption and financial crimes to combat illicit capital flows and tax evasion.

“It is unacceptable for a bank to adopt a compliance tick-the-box mindset and not understand that they’re dealing with systemic risk issues; that is inexcusable,” Kieswetter said.

“Banks would like to plead plausible deniability. It’s better for them not to know that someone is a crook because crooks are profitable clients.”

Measures to hold them accountable include listing suspect lenders and other professional institutions as entities of interest in tax crimes that are being probed, instituting charges against them, conducting detailed investigations and audits and freezing assets to secure a flight risk of capital, Bloomberg reported.

“We will not stand by” and “inadvertently become an enabler of corruption,” he said.