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Sars hones its relationship with the rich and the super-rich

Rejuvenated high wealth individual taxpayer unit has more ‘members’, is offering more services, and looks set to collect more revenue.
This may be a good time for those whose affairs have not been properly declared to make use of mechanisms such as the voluntary disclosure programme. Image: Shutterstock

The South African Revenue Service (Sars) has made considerable progress in identifying South Africa’s high wealth individuals (HWIs).

Many of them have already been welcomed into the new HWI club by way of a personal letter signed by Sars Commissioner Edward Kieswetter.

The rejuvenated high wealth individual taxpayer unit is more in line with international best practice, says Elle-Sarah Rossato, tax controversy and dispute resolution leader at PwC.

The SA unit has been in existence for many years, and although not completely dismantled during former commissioner Tom Moyane’s leadership, has certainly been ‘disarmed’ to a large extent.

It is now being revived, bolstered and expanded, similarly to the Large Business Centre (LBC), which had also been ‘disarmed’ during the Moyane era.

Read: South Africa’s private wealth plunges (Apr 21)

Sleuthing

Sars has used information obtained through the automatic exchange of financial information from other tax jurisdictions (offshore assets estimated at R400 billion), the deeds office (the property people own) and eNatis (the vehicles people own).

It also has access to aircraft registers and information from banks and other financial institutions.

Rossato, chair of the South African Institute of Tax Professionals’ tax administration committee, notes that the “old” unit didn’t always operate in line with similar units in other revenue authorities, or with suggestions by the Organisation for Economic Cooperation and Development (OECD).

The OECD started looking at “enhanced relationships” with wealthy and super wealthy individuals around 2008. It refers to a report that estimated the wealth held by high-net-worth individuals (HNWIs) to be $40.7 trillion in 2008. This was obviously before the financial crisis and the outbreak of the Covid-19 pandemic.

Segmentation of taxpayers

The OECD suggested the segmentation of HNWIs, similar to what a UK bank has done with its clients to determine the appropriate service offerings.

The bank – using 2014 figures – classified someone with investible assets of between £05.million and £5 million (R9.8 million to R98.2 million at the current exchange rate) as being affluent and someone with investible assets in excess of £20 million (R393 million) as being ultra-rich.

This segmentation has already been replicated by the Sars LBC.

It divides corporates into platinum, gold and silver ‘customers’ (or clusters) that are assigned a dedicated relationship manager.

The HWI unit replicates this model, however it is unclear how the segmentation is done or how a high net individual is defined since this information has not been shared publicly. Rossato doubts that it will be shared.

The UK unit has specialist teams which include a finance team, a rising stars team (people who have rapidly increasing wealth), a business investment tax relief team, an analysis and intelligence unit, and a dispute resolution team.

Read: Sars attack on South African taxpayers abroad (Apr 24)

Many of the international units have between 400 and 600 people operating almost like a mini-Sars, says Rossato.

The Australian Taxation Office has already calculated the net high-wealth income tax gap. The gap ranged between 6.5% and 8.2% during 2012 to 2018.

Although the South African unit aims to offer a dedicated service to individuals with complex structures and transactions, it also wants to close the perceived tax gap.

Complicated structures and transactions

Hugo van Zyl, cross-border tax specialist, says the concentration of skills in the dedicated unit will be beneficial for taxpayers whose affairs are so complex that it is impossible to deal with everything through the eFiling system or call centres.

“We need someone on Sars’s side who is knowledgeable and who understands the complexities …

“The call centre simply does not work when you are dealing with the tax affairs of a multi-millionaire,” says Van Zyl.

The revived unit has teams who are qualified and have already been alive to some legal inconsistencies. “When one of these senior Sars officials approaches National Treasury for clarity on law they have the necessary clout for treasury to listen.”

Some people will obviously not be happy about the unit, because they do not like the attention, says Van Zyl. Many of the taxpayers who have been “targeted” by the new unit have international assets, not for tax purposes, but for estate planning and to balance their portfolios, he remarks.

Read:

However, this may be an opportune time for taxpayers whose affairs have not been properly declared to make use of mechanisms such as the voluntary disclosure programme or other mechanisms to ensure their compliance is correct and can be properly verified, adds Rossato.

Privacy vs secrecy

The Society of Trust and Estate Practitioners, an international professional body for advisors who specialise in inheritance and succession planning, says many leading families are jealously guarding their privacy (as opposed to secrecy).

“The requirement of confidentiality is understood by many revenue authorities, while others regard confidentiality with suspicion. This is the cause of many conflicts between taxpayers and national tax authorities,” the body said in response to the OECD’s suggestions on enhanced relationships with wealthy individuals.

Rossato says many individuals who are not necessarily wealthy are also migrated to the dedicated unit, simply because of greater confidentiality and to prevent their information from being widely accessible within the revenue authority.

This includes people in senior government positions, and people of influence who may be exposed or exploited.

The shadily wealthy

Rossato doubts whether people who have been fingered in multi-million-rand tender scandals or who were singled out at the Zondo Commission of inquiry into allegations of state capture will be invited into the HWI club.

They will receive attention through projects initiated to address the illicit economy.

Van Zyl says the unit offers the opportunity for Sars to rebuild trust, provided the balance is kept between compliance and service; and that it is not used for fishing expeditions into taxpayers’ affairs.

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…but not the crooked and super crooked.

They are blind to the mansions in Dubai and the money in the Pakistani banks.

Also blind to the illegal cigarette factory in Johannesburg.

The fundamental problem here which is not solvable in the foreseeable future is that all that is happening here is a supposedly reliable tax service is being built to support an unreliable state. What good is a friendly tax man collecting for a one party state which at the whim of a bunch of insolent fools at Gallagher Estate chooses Magashule as the countries next president. You can candy coat something the dogs left on your lawn but it does not make it edible.

Magashule as President?

Not improbable…

Ace as Pres, Zumpie as vice. Still a little left in the pot.

I would stop working immediately. Same for Zuma and Zuma JNR.

I strongly suspect Ace is our next President Leah

Sars also needs to hone its relationship with the corrupt ANC cadres, and stereotypical types of businesses that are set up to never pay or under pay taxes like the taxi industry bosses.

It is almost comical to have a department of efficiency and integrity to support a coterie of clowns and psychopaths.

This rejuvenated SARS high wealth taxpayer unit must be very rejuvenating news for the emigration consultants, whose businesses no doubt slowed down as a result of Covid.

If I were them, I would roll out information sessions throughout SA and envite people from SARS to talk about their rejuvenated wealth division followed by emigration consultants giving advice on emigrating from SA.

Pray tell why would you want to emigrate if your tax affairs are in order? Unless, of course you are one of those people that expect only other people to pay tax.

LOL, ok, since you asked:

Crime
Poor health service
Poor education
Aggressive labour unions & inflexible labour laws
Corruption
Failing legal system
Poor transport service
High tax rate
Failing municipalities
Anti-business policies
Expropriation without compensation

etc. etc.

Let me know if you need more reasons ?

Right, so I must pay my taxes but you can choose not to? Nobody likes paying tax but you cant expect everybody else to pay and for YOU to share in the benefits – Maybe move to Greece then, they have more registered Porsche owners than taxpayers – Very dangerous cycle

Reckon SARS should target Parow 1st 🙂

Also note, non disclosure/non compliance is now a criminal matter (bit harsh but the tax admin act has been amended)… Roll the dice and see what happens… Cant emigrate with a criminal record (well maybe you still have a shot with Australia – The seem to like dodge SA’s)

It’s obvious isn’t it?

@Gemini, you can’t really be that short-sighted and idealistic can you? People aren’t immigrating because they are committing tax fraud; or because their tax affairs aren’t in order.. They will immigrate now to avoid paying these ridiculous taxes in future. If SARS plans to target the super rich and their wealth to distribute it to the socialists and their BEE buddies, then the super rich and their wealth (and businesses) will leave before that happens.

Then there is the other membership list, too long to list here but will be headed up by the Ace of thugs, and his pal Zumpie, Mabuza and Bongi.

this list will stay in Eric’s bottom drawer.

There are no difference between Tax Dodgers and Corrupt officials! Both stealing from the rest!

Did you enjoy Robin Hood movies or did you call him an expletive each time he appears?

Robinhood didn’t rob from the rich to give to the poor.. he robbed from the government/king to return taxes to the taxpayers..

This is like reading Alice in Wonderland. What a load of rubbish. Again another backslapping article by SARS not dissimilar to the article shortly after the new commissioner was appointed and it was how they were going after undeclared income and especially rentals, i.e. they were going after the guy who is renting out his granny flat and not declaring it.

I get the PR goal of this article, how they “going after” the rich etc blah blah.. However they seem to miss the point here, there is a lot of anger out there with all the looting that is still going and SARS involvement in it. Mr Kieswetter you need to get a big fish in all this looting into an orange jumpsuit on charges of tax evasion and the honest tax payers opinion will start to change. At the moment you just looking like bullies that are scared of the big boys.

Agree, just a PR exercise to scare us compliant taxpayers!??
Go after the big fish politicians and their business associates and THEN give your PR pitch again?? Maybe then the other taxpayers will take note?

Even declaring it is not helping the small man. Clawed back a few thousand from my daughter “for not charging “market- related rent”. How exactly they determined that, is unclear. But the tax practitioner’s fee to fight it, would have been more, so they resigned to this theft and sold the property to avoid futher hassles. But if someone at Zondo talks about receiving a donation for the ANC of one million CASH and giving no receipt to boot, no one bats and eyelid. Way to go, Kieswetter, SARS is soaring to new hights.

If the Receiver wants to establish any trust it must go firstly and nail all the tender crooks and assorted ANC and EFF thieves.

Has SARS properly defined who a HNWI is in RSA ? It’s not enough to say someone wit a NW or $1M, and what does that consist of ?

It will only be one demographic. “WMC”. BEE Cadres will be protected because of ‘inequality’ and ‘redistribution of wealth’

No doubt, only those who did not pillage this country will be caught and no-one in Dubai. The regime and SARS are required to destroy legitimate business and individuals

Don’t be fools.

This is a service to the government.

Not a service to any citizen or taxpayer.

Why dont we just REINSTATE the scorpions with full mandate!!!

I have been waiting for my personal letter from Mr Kieswetter for quite some time now. I have not received anything to date.

Every man and his dog are getting letters, and some people have even framed theirs to hang it above the fireplace. I am starting to feel neglected and ignored.

Must be due to the incompetence at the Post Office…..

You can have mine if you like? Its framed above my fireplace next to my SABC tv licence letter of demand.

Throw it in the fire 🙂

Good to see that SARS aims to improve its relationship with all ANC connected elite. Start from the top, SARS, you’ll likely find plenty of non-compliance amongst ANC cadres.

Love how there’s literally NO CALLS for reduced spendingz, fiscal discipline and real, sustainable economic growth.

Cos that would be a pipedream!

Let’s rather go after the few who’ve made it in life – and instead of letting them buy things (i.e. support businesses) or donate their own money…

We’d rather a totally inefficient (at best) and corrupt (at worst) government should get more of it.

For the people that parade cars and houses and consumption as a badge of their success : maybe SARS should do a membership card and TShirt for these taxpayers.

Imagine you thought you were a diknek and SARS hasn’t bothered to invite you! The shame

As the Escape Goat was recently offered on the Altar to wash away the stolen trillions, a plan had to be made to ensure that the unconnected get fleeced of every penny they might own in order to stuff more koffers.

Soon to be overlooked, as this will be accounted for in that famous ‘finding’ of the Auditor General’s report and then (maybe) mentioned in the Zondo Commission.

This ‘personal’ touch from the Taxman shows that the tax base is dwindling due to emigration and also the decimation of the small business owner during the lockdowns.

The frogs must now be feeling the heat for sure. I sure am!

Strangely I too received a letter – you’ll now get world class health care and pensions, you’re streets will be clean, you don’t need a fence anymore and can look forward to great public transport, clean water, cheap electricity and efficient public transport. Government will be 99.5% clean and accountable. Houses and schools will be built. Our poor will be educated and treated with dignity and lifted out of poverty in a single generation. Red tape will be decimated. Labour laws will be freed up. Legislated racism such as BEE will disappear. Ace and Zuma and all the rotten cancer that has infested our body politic will be in orange for decades. And then I woke up …

Forgive the ignorance, but I’ve just heard on the radio news that the minister of Finance said that the whole of the taxi industry in South Africa only pays R5 million in taxes?

End of comments.

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