SARS targeting these taxpayers in 2024

SARS will prioritise “big ticket taxpayers” like high-wealth individuals and multinational enterprises (MNE) in 2024, as their non-compliance translates directly to millions in tax revenue.

This is according to Tax Consulting SA’s head of strategic engagement and compliance, Jashwin Baijoo.

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

South Africa’s preliminary tax collection beat estimates despite significant refund growth, 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.

This record was largely achieved due to SARS’s improved compliance strategies.

In his presentation, Kieswetter said that – even with only 12,500 employees – SARS will ensure to be “a catalyst to a more efficient and effective economy” through its “tax administration and our compliance work, which underscores our strategic intent of voluntary compliance”.

Baijoo said the success of SARS’ clampdown on non-compliance cannot be disputed, especially in extreme cases with high-profile taxpayers – setting an example to the nation. 

Kieswetter said he extracted additional amounts from 25 high-net-worth individuals because of underpayments, which contributed to the record tax revenue.

“When it comes to SARS’ war on non-compliance, no punches have been pulled, even when punching in the heavyweight division,” Baijoo said. 

“Being a strategic mover, Kieswetter’s strategic initiatives, such as the creation of the High-Wealth Individual Unit and insertion into the law of Advanced Pricing Agreements, have served to bolster SARS’ reach and capacity, being the bane of existence for non-compliant affluent or MNE taxpayers.”

Baijoo said that while MNEs are familiar with international transactions, it is astonishing how many fail to adhere to international tax law, specifically pertaining to base erosion and profit shifting, also known as ‘transfer pricing’.

He said many MNEs find themselves facing transfer pricing audits regularly.

“Practically, this stems predominantly from failing to establish the correct tax and legal foundation to support the commerciality and profitability of ‘affected transactions’ between companies under common control,” he explained.

Baijoo said SARS has strengthened its tax treatment on all international transactions through various AI data-driven processes and the outsourcing of specific functions.

This allowed the revenue service to collect R36.6 billion from 31 Transfer Pricing Audits, 5 International Audits and 8 Integrated Audits. 

“In practice, and to ensure group compliance, it is essential for MNEs to enlist the appropriate tax advisory and legal muscle, ensuring all Transfer Pricing documents, including Local and Master Files, are legally sound and will meet the muster of any revenue authority,” he said.

When it comes to high-wealth individuals, Baijoo said they are known for elaborate offshore structures and multi-layered investments.

These are created in an effort to optimise their taxes whilst preserving their wealth. 

“Be it based on sometimes aggressive tax advice from a ‘trusted’ advisor or conservative but bespoke tax planning, one key concern has always remained: how do you get the money out?” he said.

The confirmed revenue contribution from high-wealth individuals is recorded at R12.5 billion in the last year. 

“The introduction of the High Wealth Individual Unit and implementation of the Approval for International Transfer process evidence SARS’ efforts to sink their claws in even deeper, in efforts to be South Africa’s Robin Hood,” Baijoo said.

Kieswetter noted that SARS has seen a decline in high-wealth emigration applications, but Baijo said this is not to say that South Africans are not looking at alternate ways to optimize their tax affairs, including offshore investments.