The South African Revenue Service (SARS) seems to be stepping up a gear with an increasing number of successful prosecutions of tax dodgers. Only a few short years ago, SARS was intentionally sabotaged and appeared to be a shell of what was once a world-lauded institution. Lately it seems that SARS is finally showing its teeth with these successes.
SARS is keeping up with technology and trends by closely monitoring the popular social media platforms where on a regular basis people are boasting about their wealth. Apart from not wanting to attract any undue attention to any legally obtained status symbols why would someone do the same for illegally obtained wealth? In what appears to be a classic ‘no-brainer’, SARS has access to ready-made evidence including social media posts, photographs and videos showing properties, vehicles and other excesses that may have been obtained illegally.
SARS commissioner Edward Kieswetter and many of his colleagues have long warned non-compliant tax payers that they will come down hard on attempts to hide assets and/or if corruption is suspected. SARS has established a new wealth unit focussing on taxpayers with assets of R75 million or more and a further detailed focus on three main areas:
- Ownership of assets and usage of a trust or a special-purpose vehicle.
- Multiple income sources and how they are structured.
- International assets or bank accounts.
It is not only the high net worth taxpayers being targeted as SARS are regularly announcing raids on warehouses mostly related to the illicit cigarette industry. At the beginning on March 2022, three Kwa-Zulu Natal locations were raided by SARS and SAPS resulting in the confiscation of cigarettes worth R3.1 million.
Resulting from an NPA investigation, in December 2021 a director of Oakbay Trading was handed a 10-year prison sentence for evading excise and duties payable on cigarettes. Mr Kieswetter said, “This conviction and sentencing should send a clear signal that SARS has a zero tolerance for such criminal behaviour and will use all avenues at its disposal to pursue these criminals”.
In February 2022, man’s best friend proved their worth as the Customs detector dog unit intercepted three shipments of catalytic converters intended for the UK, Jordan and Dubai. Palladium, rhodium and platinum found in catalytic converters in car exhaust systems can be used in manufacturing jewellery, weapons and drugs.
Considering the proverb ‘What goes around comes around’ eventually illegal operators will fall foul of SARS or some other authority, but the surprising part is the number of legally registered businesses that neglect to make payments to SARS for PAYE, company tax and VAT returns.
In the last couple of months, SARS successfully targeted two Radiologist practices attaching assets for unpaid taxes amounting to R52 million and an electrical contracting company for failing to make payments over the last 3 years with assets seized to the value of R20 million – these goods were auctioned to cover the debt.
A large number of these non-compliance cases have been uncovered using data analytics driven risk detection. Data from both local and international sources such as banks, deeds office, insurance providers and National Treasury’s central supplier database have been a key element in the recent successes. In the 2021 financial year, SARS has collected R115 million from compliance actions with 33% because of taxpayer risk profiling using data mining and machine learning.
From a few years ago when people complained about how ineffective SARS were to recent complaints about the ‘heavy-handed’ approach to non-compliance it is clear that the new approach by SARS under the leadership of Edward Kieswetter is achieving results.
Author – Warrick Asher, March 2022.