Sars targets super-rich tax dodgers


Sars_office aug 8

Durban – South Africa has 2 300 super-rich individuals, and many are under the taxmans spotlight for dodging taxes.

In the past 12 months, 280 High Net-Worth Individuals (HNWIs) underwent tax compliance reviews and analysis and 109 of them were identified as high risk, and earmarked for a full audit, the SA Revenue Service (Sars) has revealed.

The agency said it had concluded 62 full audits of these multi-millionaires, yielding R184 million with 14 of them viewed as potential serious offenders because of their large, outstanding returns.

People whose gross annual income is at least R7m, or whose gross wealth is at least R75m, have been defined by Sars as HNWIs. There are 2 300 on the Sars register.

They have been identified as one of the seven key categories posing a specific risk to the work of Sars, to the fiscus and ultimately to the economic future of South Africa, and targeted in the next four years for special attention.

Sars said in a briefing note issued this week that spotlights on the super wealthy occurred around the world.

Other key areas identified by Sars are textile and clothing, large businesses and transfer pricing, the construction industry, small businesses, tax practitioners and trade intermediaries, as well as the illicit cigarette trade.

Sars said some of the countrys richest used many creative ways to avoid paying tax, including:

* Using non-residency status to reduce taxable income, especially investment income.

* Establishing public benefit organisations (PBOs) to avoid liability on the transfer or donation of assets.

* Using trusts to shield assets from tax liability.

* Expropriating profits to tax havens without tax being paid in South Africa.

* Salary structuring where a director may choose to receive dividends instead of a salary or bonus to avoid higher taxes.

Sars spokeswoman, Marika Muller, would not say how many of the high net-worth individuals were in KwaZulu-Natal.

Most of these issues as priority areas are handled at a national level and as a result I cant give you KZN-specific data for them, she said.

It is also worth noting that where a person lives or where a company does business is not a reliable indicator of where they are registered for and pay tax and that is how we record them.

Muller also refused to speculate on the amount that might be owed to Sars by HNWIs with compliance issues. She said any speculation would be very risky.

However, four criminal investigations involving HNWIs are currently under way.

The clothing and textiles industry is also under the taxmans spotlight, with the discovery by Sars on visits last year that 67 percent of the 924 industry businesses were not registered for either income tax or VAT.

A sample of the businesses, suppliers to the countrys major retailers, indicated that more than 90 percent of them had serious non-compliance with a range of tax regulations.

Offences included under-declaration of both VAT and income tax, and non-declaration of invoices to Sars.

At least 190 of these suppliers continue to trade despite having VAT returns that had been outstanding since 2008.

It is anticipated that at least R1.2 billion will be generated from this focus area, Sars said.

Of the 152 retail outlets and traders visited by Sars last November, only 30 percent in KZN were found to be registered for VAT, Muller said.

That campaign also led to the seizure of 85 000 items worth almost R13m, Muller added. But there had been positives in this sector in protecting the local industry against the negative impact of the flood of cheap imports.

Of all the industries being scrutinised, Sars has identified the construction industry as being the least compliant.

Industry players collectively owe more than R4bn in outstanding taxes.