sleuthing-sars-on-a-mission

Sleuthing SARS on a mission

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Despite numerous warnings in the media and from economists, South African tax-payers did not receive the promised “nasty surprise” in FinMin Tito Mboweni’s annual Budget Speech on 26 February. There was no increase in VAT or Capital Gains Tax, no sin tax hikes and no introduction of a once-off personal tax levy. Do I hear a collective sigh of relief?

Instead, the public service wage bill is in focus to achieve the R160 billion in cuts over the medium term.

Among those targeted for a reduction in benefits and salary are the millionaire 290,000 public servants earning R1million plus per annum. This seems to be more in line with the President’s 2018 State of the Nation address, where he promised a lifestyle audit, a tool widely accepted to combat tax evasion.

Both KPMG and Eskom reportedly conducted lifestyle audits on their staff last year, with the latter reporting that violations among their 365 senior employees amounted to R1.3 billion for the 2019 financial year.

SARS gets tough on defaulters

Despite a reprieve from a tax increase, South African tax-payers should not be lulled into a sense of complacency. SARS is, by all accounts, working hard to recoup its former reputation as a globally respected institution. One of its most obvious priorities is to increase revenue generation. For the financial year ended 31 March 2019, SARS had collected R14.6 billion less than estimated in the revised Budget.

SARS’ success in pursuing outstanding defaulters has featured in recent headlines.

In one report in early March, a Cape Town businessman’s assets were seized by SARS to settle a R354 million tax debt. The article cites SARS Commissioner Edward Kieswetter, who said, “this latest protracted legal battle is further evidence that SARS is working hard to regain capacity lost over the past few years in dealing with taxpayers avoiding their tax obligations through an abuse of the legal system” (Sowetanlive.co.za).

An earlier report, dated February this year, saw yet another Cape Town businessman evicted from his home, which is held by a company. The Constitutional Court dismissed his appeal to place the company in business rescue, as it is already in liquidation.

“SARS will make it costly for those determined to be non-compliant and will oppose vexatious and frivolous litigation up to the highest court in the land,” Kieswetter promises (TimesLive.co.za).

“Tax crime, like corruption, is not a victimless crime. It directly affects the poorest of the poor, who are dependent on basic services, including a social security safety net for pensioners, child grants and provision of housing and education.”

And inadvertent errors?

Unintentional errors are treated the same as intentional non-compliance, but SARS considers overall tax behaviour when penalties are determined. It is therefore of utmost importance for tax-payers to use the services of qualified and SARS-registered tax practitioners to submit their tax returns.

Reason for hope

South Africa undoubtedly faces a herculean challenge in getting its economy on track, with global ratings agencies’ threats hanging over us. Calls for President Ramaphosa to move more quickly against corrupt elements that persist in the ANC grow louder and more urgent. Nevertheless, as SARS’ vigilance reveals, processes are underway to restore financial stability.

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