The South African government and economy loses billions in tax revenue due to criminal syndicates that avoid tax, according to South African Revenue Service (Sars) Commissioner, Edward Kieswetter.
Criminal syndicates are costing South Africa hundreds of billions of rands yearly, according to the commissioner and it needs to be addressed.
“We are aligned with the Davis tax committee, which says the value at risk from syndicated crime is easily between R200 billion and R300 billion a year,” Kieswetter noted.
Kieswetter added: “My biggest concern is a proliferation of syndicated crime. This is of more concern to me than little fires of tax revolt”.
Service delivery strikes
Kieswetter, in an interview with Business Times, said that he is also concerned that small tax revolts will lead to national strikes as more and more South Africans fail to get service delivery from government.
“Sars is significantly underfunded to make the investment in modern technology and data science required for us to make a meaningful impact,” Kieswetter said.
Despite the fact that Sars may be too underfunded to make major impacts on large syndicates, that does not mean that the authority is not committed to taking steps to ensure that taxpayers declare the correct taxable income.
André Daniels, head of Tax Controversy and Dispute Resolution at Tax Consulting SA, noted that “the fiscal pressures on Sars’ tax collection appear to have now compelled the authority to actively initiate the arrest and prosecution of taxpayers who do not accurately declare their taxable income”.
“For a long time, it has been warned that Sars possesses third-party information from banks, financial institutions, estate agents, car dealerships etc., enabling them to identify those who are not declaring their income correctly,” Daniels said.
“However, many South Africans have not taken this message seriously enough to declare accurately and fulfil their tax obligations. They may have felt a false sense of comfort from the seemingly hesitance of Sars to actively enforce its mandate through criminal enforcement.
“As Sars continues to scrutinise non-compliance, whether done intentionally or not; wrongfully, falsely or under-declaring, under tax law (this) means repercussions.
“While many taxpayers have slept peacefully in the past, foreseeing the worst that can happen is a slap on the wrist with some penalties and interest; a new Hawks / Sars prosecution strategy is a game changer,” said Daniels.
“With tax season well under way, taxpayers should take special care to make sure this tax return is done on a complete and correct basis. They should also carefully have a look at past disclosures in their tax returns and whether the numbers disclosed are correct and everything adds up,” he said.