Tax Consulting SA legal manager for tax and compliance in Africa, Jashwin Baiju, warned that the South African Revenue Service is focusing on non-compliance by a small number of South African taxpayers, placing a heavier compliance burden in an attempt to fill the fiscus’ persistent deficit.
Baiju said the welcome message from the director of the SARS High Wealth Unit (HWIU), which was received by C-Suite executives, was likely to serve as a warning or “positive reinforcement” that the road to greater compliance was about to begin.
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“Over the past few years, the South African Revenue Service, with the full support of the Presidency and the National Prosecuting Authority, has stepped up enforcement, or rather, cracking down on high net worth individuals around the world.
“As we have seen and as confirmed in the 2022 Africa Wealth Report, there is a small number of South African taxpayers who own a significant portion of the country’s wealth. Although this proportionality has been noted as the largest wealth gap in the world, discussions about introducing a wealth tax may not be the most feasible option at this stage,” he said.
Baiju said the focus here is on net assets and liabilities, as well as taxpayers who have left the country but continue to have South African interests, who have for years believed that certain aspects of their wealth were tax-free, so to speak, due to being offshore.
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He warned that this misconception is quickly being corrected by revenue authorities, who, along with external jurisdictions that intersect with the interests of specific taxpayers, can now conduct double audits or fulfill obligations established by automatic exchange of information protocols.
“While we note that high net worth individuals typically have more complex tax affairs, which in most cases require the attention of a tax practitioner or specialist in the field, this is not always the case. However, on critical analysis, the preliminary request for documents released by the HWIU puts a key emphasis on non-compliance and the harshness with which they are treated,” he said.
Contrary to the recent welcome note, it seems that SARS has not yet decided whether they will use a stick or a gingerbread man in dealing with these very rich people.
But Baiju advises, “In order to protect yourself and your assets from SARS, the best strategy remains to always ensure proactive compliance. Where you find yourself on the wrong side of SARS, there is the advantage of taking the first step in seeking appropriate tax advice, ensuring that you are not beaten for what could be the slightest mistake. But where something goes wrong, SARS needs to deal legally.”
“As a general rule, any and all correspondence received from SARS should be dealt with promptly by a qualified tax professional or tax attorney who will not only act as a defense to the taxpayer against SARS enforcement action, but will also be an expert in their own matters. correctly, the taxpayer will be properly advised on the most appropriate solution to ensure their compliance with the tax law,” he concluded.
