Sars extends rich tax dodger battle into other countries

Rich people not complying with tax laws will face the music, Finance Minister Pravin Gordhan warned on Monday.

In written reply to a parliamentary question, he said the amount of R50 billion reported in the media as being owed by high net worth individuals (HNWI) was an estimate of gross income rather than tax, and was based on statistical extrapolation of third party data.

"An accurate estimate of the potential tax liability of this group is not possible as each case is unique," he said.

For example, in some instances income might be held in trusts, companies, or other structures, while in other cases the income might have been derived from dividends or capital growth rather than remuneration, and therefore qualified for a lower rate of taxation.

That being said, the SA Revenue Service (SARS) was taking steps to improve compliance among HNWI. These included establishing a dedicated unit to handle the tax affairs of the HNWI segment. Improvements in compliance with the tax laws would be a focus area for SARS this year.

SARS was using its own data and data from third parties to identify failure to register as a taxpayer, undeclared income, and a variety of other forms of non-compliance.

Gordhan said SARS had also commenced audits and investigations on a number of wealthy individuals and their associated entities, such as trusts and companies. Given the complexity of tax affairs of many HNWIs, audits and investigations in this segment usually required a substantial and extended commitment of resources.

One such case involving over R200 million in tax and over R400 million in additional tax had involved litigation in multiple jurisdictions and had stretched for over a decade.

HNWIs were often internationally mobile, with assets and activities in other jurisdictions, which demanded a greater level of international co-operation. South Africa currently had 70 double taxation agreements and five tax information exchange agreements in force that provided for the exchange of information with other jurisdictions, he said.

SARS had also commenced joint audits with jurisdictions like Botswana, the United Kingdom, and the United States with respect to HNWIs.

"The legislative framework has been modified to limit arbitrage opportunities and close loopholes. As examples, the higher CGT [capital gains tax] and dividend tax rates have helped narrow the arbitrage gaps between normal income and capital gains and between the income derived in an individual's hands and through a corporate entity.

"As noted earlier, the information reported on by the media was based on a statistical extrapolation which indicated that there could be up to 9300 individuals in South Africa who meet the SARS criteria for registration as a HNWI.

"This appears at odds with SARS's current registration of 2300 HNWI," he said.

SARS was conducting follow up research and risk assessment to identify actual cases of non-compliance, including failure to register as a taxpayer. Where non-compliance was established, action was taken, including registration of the individual, imposing any tax outstanding, additional tax (understatement penalties) of up to 200 percent, and interest on outstanding amounts. Administrative penalties for failing to submit income tax returns could also be imposed.

"Collection efforts to recover the taxes payable, within the timeframes set by law, have begun on cases that have been finalised. Where appropriate, individuals could also face criminal charges," Gordhan said.

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Agree with the minister I am against the idea of super tax for the rich, it is against economic principles. But the rich who do not want to pay tax, I agree with the Minister, should be brought to book. They have to pay their fair share. Otherwise, they are the first to lose . .more should the country under as result of a bankrupt government, just as it is happening in Greece and Swaziland. . .less by Lucky one on April 17 2012, 09:30 Find this comment inappropriate? Report it

Stop the Corruption First Stop your thieving ANC from looting the taxpayers money then people will feel like paying tax by Mo on April 18 2012, 15:38 Find this comment inappropriate? Report it

ANC investigate the Top anc structure u will find billions hidden there by zale on April 19 2012, 11:34 Find this comment inappropriate? Report it

Expenditure morality I am a law abiding black citizen and pay my taxes religiously. I pay around R500 K annually. The question is what do I get for my tax rands and the simple answer is that not much. The number priority for any government is the safety and security of its . .more citizens - which this government is not providing. All the ANC government is concerned about is fleecing us for patronage reasons. Start with expenditure morality and accountability then tax morality will follow. ANC deployees need to distinguish between their own funds and tax payers money. Expenditure morality means the government as the biggest procurer of goods in the economy needs to pay the lowest price for goods purchased and not award tenders the way it is currently been done. It is crooked mentality that tenders are awarded to the highest bidder beacuse the bidders get BEE points. It should work on the basis that if there are two tenders for the same amount (being lowest amount and same quality), BEE points are awarded to separate the bidders, not allow BEE points which in effect means BEE companies theoretically gets 10% more as is the current practice which amounts end up being 10 - 100 times more because of political connections. Minister, there is at least R200 billion of taxpayers money being wasted annually - stop the wastage and use our money to uplift . .less by Diagree with Gordhan on April 19 2012, 11:59 Find this comment inappropriate? Report it

Audit Try Auditing Zuma and CO. :P wonder how much outstanding tax they have by Bob on April 20 2012, 11:39 Find this comment inappropriate? Report it

It is the duty of every South African to avoid paying too much tax. Especially in these times of ANC government looting, fraud and corruption and wastage. Gordhan will soon find that the goodwill of SA taxpayers will dry up if he cannot stem the wastage of taxpayers money. The SA taxpayer is not an unending stream of . .more revenue to fund the ANC jollies. Taxpayer's money must be used to deliver to the people as per the ANC election promises. As evidenced by the rioting, the Nation's patience is being sorely tested. A 1976 scenario is in the making. . .less by Ben on April 20 2012, 15:55 Find this comment inappropriate? Report it

clamour about foreigner run businesses I have come across a lot of complains from SA taxpayers about foreigners who run business in SA but are not registered for income tax and VAT. The foreigner run businesses always undercut businesses run by SA taxpayers, thus driving them out of the . .more market. And the absurd part of it, the government is collecting tax from businesses run by SA citizens, who are being driven out of the market by unregistered foreigners. When I was driving around in one particular industrial area heading to a particular taxpayer I noticed a lot closed factories around. The one that I was heading to was the only one left in that area, which meant it was the only one that revenue can be collected from. Government wouldn’t collect from closed businesses. I was very much dismayed, but I could not tell the taxpayer that. I just kept quiet. The government must produce turnaround strategy to get foreigners into the tax register and enforce compliance.. . .less by Lucky one on April 24 2012, 08:26 Find this comment inappropriate? Report it

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