SARS going after one group of taxpayers
The South African Revenue Service (SARS) is bolstering its audit and prosecution power to target non-compliant high-wealth taxpayers.
This is a warning from Tax Consulting SA’s head of strategic engagement and compliance, Jashwin Baijoo, who said high-wealth taxpayers naturally equate to high tax collections.
“No matter how much money you have, you cannot afford to be non-compliant with a revenue collector on a compliance crusade”, he said.
“The age-old adage that money cannot buy happiness rings equally as true for compliance, with SARS making clear that no matter how much money you have, if you are non-compliant, you are on their hit list,” Baijoo warned.
He said SARS’ recent criminal prosecutions, ranging from VAT fraud syndicates to local celebrities, is evidence of this.
For example, billionaire Christo Wiese and his associates were recently involved in a court case that ended with the Supreme Court of Appeal siding with the taxman.
The case centred on his dispute with SARS regarding a R216 million tax debt from a company called Energy Africa.
SARS argued that Wiese and his associates, aware of this potential tax liability, orchestrated the transfer of a valuable loan claim held by Energy Africa.
SARS said this financial manoeuvring aimed to dissipate assets and obstruct tax debt collection.
Wiese and his associates countered this by arguing that SARS couldn’t utilise the specific provisions of the Tax Administration Act they relied on (section 183) until a formal tax assessment was issued.
They said a definitive tax debt couldn’t be established before this assessment. The SCA sided with the taxman, delivering a blow to Wiese’s arguments.
“It is evident taxpayers are dealing with a strong, competent revenue authority, following a zero-tolerance approach to non-compliance, across the spectrum,” Baijoo said.
“Bolstered by the National Prosecuting Authority, not only are SARS targeting the non-compliant HWIs themselves, but casting the net wide enough to catch both the advisor and taxpayer in one fell sweep.”
He said the reinvigorated targeting of HWIs is fuelled by SARS’ use of data-driven insights from South African and international sources.
This data is used to detect any degree of non-compliance and hold the perpetrating taxpayer, and in some instances, tax-aggressive advisor, accountable.
These data-driven insights inform SARS of all transactional records about specific taxpayers and their tax planners.
By using AI, SARS’ “fine-tooth comb” is no longer needed to extrapolate these records into strong legal cases for non-compliance.
“This collaborative approach enables SARS to access a comprehensive dataset, facilitating more robust evaluations of taxpayers’ financial activities,” he explained.
“With SARS’ enhanced non-compliance detection capabilities and a sharp focus on both past and future non-compliance, correct tax and legal guidance has never been more critical.”
He said the most prudent approach is to heed SARS’ warning that non-compliance will be hard and costly for the wealthy.
This is especially the case with the Tax Administration Act, which allows the imputation of tax debt liability on delinquent advisors where they have knowingly assisted in asset dissipation to obstruct tax debt collection.
“For affluent taxpayers and their seasoned advisors, managing intricate financial portfolios, these developments signal a need for heightened diligence in tax record keeping and reporting,” he said.
“Giving credence to this strong stance on the eradication of non-compliance, at all levels, SARS’ High Wealth Individual (HWI) Unit has resolved to bolster its manpower, geared at building ‘a smart modern SARS’.”
Baijoo explained that, upon first glance, SARS’ recent vacancy posting may appear to follow suit from the revenue collector’s prior recruitment drives.
However, taxpayers may not be aware that the vacancies SARS has posted are targeted at highly specialised legal, risk, and audit assassins.
He added that the list of advertised SARS vacancies makes it self-evident that the HWI Unit recruitment plan is not generic but targeted and precise, detailing the need for specialists in legal, audit, and risk.
“If there was ever a shadow of a doubt, the HWI Unit are putting together their own ‘A-Team’ to hunt tax structuring specialists and their wealthy but non-compliant clientele,” he said.
“It is then left to the AI to provide comprehensive data-driven insights, assisting in deciding the fate of these tax dodgers.”
SARS’ vacancies can be seen in the image below, which is courtesy of Tax Consulting SA.
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