Low-hanging fruit for Sars to harvest

Mounting evidence of ill-gotten gains surely makes applying the law the easiest way to boost revenue collections.
The receipt of bribes is taxable, the paying of bribes is not tax-deductible – and the penalty for undeclared income is 200%. Image: Shutterstock

Another week in the life of the Zondo Commission of Inquiry into allegations of state capture, and more money-for-jam opportunities for the South African Revenue Service (Sars) become apparent.

On Monday, evidence leader Kate Hofmeyr told the commission it would be hearing about the conduct of the Mhlathuze Water Board (MWB) in Richards Bay during 2015 and 2016. At the time, Dudu Myeni was chair of both MWB and South African Airways (SAA).

The investigation carried out by the commission’s legal team has revealed what appears to be an elaborate scheme of looting, in which monies were siphoned out of MWB for the benefit of officials and employees within the water board.

Read: 
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Tax is an important weapon in clawing back ‘ill-gotten gains’ 

In a related matter, the Free State Development Corporation (FDC) received monies from the state for an RDP housing scheme in Vrede in 2015, with contractors – including an entity named VNA Consulting – paid by FDC.

R2m thank-you for Zuma?

Part of the commission’s investigation is to explore whether there is any link to an alleged R2 million ‘thank you’ paid to former president Jacob Zuma for his role in facilitating the appointment of the contractors.

The first person to testify in relation to these allegations was Dudu Myeni’s son Thalente Myeni, sole proprietor of Premier Attraction 2016 cc, one of the entities providing ‘consultancy’ services to VNA. Premier was paid R2 million by VNA.

Hofmeyr began leading evidence, but Thalente, who claimed to have many businesses, was vague on details. Premier’s consultancy work could have included “planning whether to build one or two stories”, and figuring out “where the pipes had to run”.

And Thalente was not sure if an invoice had ever been issued for the R2 million.

He couldn’t give an idea of the total turnover earned over the years, nor any specifics of the consultancy services or the number of staff hired.

Why didn’t the commission request the Vat invoices, annual financial reports, income tax returns, and IRP5 returns for deductions from payments to staff? Perhaps it did and nothing was forthcoming.  

With no aspersions on Thalente, nor any of the players in this convoluted scheme of contractors and sub-contractors, my thoughts turned to the taxation possibilities of illicit activities that would not be included in the data obtained from the relevant taxpayers.

The proceeds of crime are taxable and vatable

  • A vendor delivering taxable supplies of more than R1 million per annum must register for Vat. Any ‘vendor’ who has received more than R1 million a year for any service rendered (which would include introducing one crook to another) must be registered for Vat, and must pay Vat on all those services (criminal or not). A proper Vat invoice must be issued in accordance with the Vat Act.
  • If a vendor has received more than R1 million in cash or otherwise and isn’t sure what it was for, or whether an invoice had even been issued, is irrelevant. Sars can raise an estimated assessment.
  • If a criminal or money launderer has received say R2 million and has paid it over to someone else, the R2 million receipt is taxable. But the R2 million payment is not deductible. The receipt of bribes is taxable. The paying of bribes is not deductible.
  • Anything received in exchange for a service, even a free holiday, is taxable.
  • The proceeds of crime are taxable.
  • The penalty for undeclared income is 200%.

Now that Sars is back on track and desperate to harvest low-hanging fruit before the end of March, one can only hope that it has been following the proceedings of the commission avidly.

This is surely money for jam. Auditors don’t even have to leave their office – they can watch it on their computers.

We should expect Sars to at least have issued lifestyle questionnaires to all those who have appeared before the commission on allegations of having received assets, gifts, livestock (such as a sheep), donations, bags of cash, or of having been given free use of any asset or property.

Sars has no doubt raised income tax assessments, Vat assessments, penalties, and interest on any income that has not been declared or Vat that has not been paid over. Taxpayers are looking forward to hearing about Sars’s successes in the budget speech next week.

The economy may be at a low point, but criminal activity is not.

Sars – open your eyes and look around you.

For the time being, forget your fancy algorithms and pie-in-the-sky data scientists. Forget your penchant for auditing medical aid expenses.

Open your eyes and look around you.

Do some groundwork.

Expand the tax base.

Harvest what is not in the Sars system.

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What an excellent idea. Better than a court case as SARS can raise an assessment of money due and it is up to the TAXPAYER to prove it is wrong.

The assumption that SARS will get off their ar$es and do something is as absurd as expecting admissions of guilt from any of the looters in the first place.

Simple, practical six-point checklist. Thank you Barbara.

It seems to me there is a total lack of political will to catch these thieves.

SARS must also pay out the tax returns they are sitting on.

Also all the smug AirBnb owners flying under the tax radar…

They are easy enough to nail when SARS enriches their dataset in collaboration with AirBnB (when the short-term letting legislation kicks in)…

I am amazed that SARS/SA has not applied an automatic 20% or 30% tax withholding on all Airbnb properties listed in SA. That is a seriously low hanging fruit.

If any AirBNB property owner actually makes a profit, they need a better accountant… Just saying…

@rfjock…Huh ??..

Typical uninformed comment !

You make it sound as if BnB owners are rolling in dough

Rather, time to bring some sobering perspective here [ I tried this game once before, so have some experience here ]:

Firstly, these couples are usually retired or retrenched employees trying to stay alive utilizing the last asset they have, ie their home, to generate some kind of an income

In addition to many people stuck with large homes they can’t sell, this is a last no choice option

Even worse, besides a few popular destinations like CT and suburbs, the majority are suffering in a contracting economy, especially as competition in this field is tough with many many options as more people resort to this industry to try survive [ in my suburb alone there are about 30 Airbnb options in just a few residential blocks…… and mostly always vacancies ]

They are supporting the local economy employing domestics/gardeners, keeping municipals alive by paying rates and taxes, work hard and are at least trying to earn an honest living

Yeah, what a fantastic idea – take away the last bit of profit they make after deducting running expenses etc by then still taxing them to death

‘RfJock’, keep dreaming your government revenge fantasy on these so called ‘smug’ people according to your jaundiced view if it makes you feel better hey

I have a few BnB clients and they declare their income. They also operate the least profitable enterprises in our client list which includes everybody from Architects to Spaza shops. Sorry, you will only hurt an already crumbling industry that is suffering due to bad press.

@reality

Oh cry me a river dude…

Everyone is obliged to register for, and pay their taxes. Unless you are condoning tax avoidance…? Bet you are the first at the dinner table to b1tch and moan about crime in SA…

There are many stories about long term tenmants losing their leases due to greedy landlords making a quick (undeclared) buck on AirBnB. This is particularly prevalent in Grennpoint/Seapoint…

Many are elderly people with no-where else to go.

So catch a reality check, poepel.

@rfjock who wrote:

“Oh cry me a river dude…”

???

You were the one that started whining about “smug” airbnb owners

Instead, stop bitching about small businesses trying to make a living as you might want to consider redirecting your anger at the root cause of SA’s economical illness:

Government

“Everyone is obliged to register for, and pay their taxes. Unless you are condoning tax avoidance…?”

Rfjock, its apparent you are in complete denial, or suffering from cognitive dissonance

The fundamental problem here in South Africa is NOT THE AMOUNT OF TAX COLLECTED, nor the 0.001% of small businesses operating ‘off the radar’ like the bnb homeowners you are foaming at the mouth about

Rather, simple basic logic will tell you that Government can impose 100% taxes and squeeze every single Rand from every last taxpayer…….but………it won’t make a jot of difference until the insatiable black hole that is corruption, looting and incompetence is plugged !

Until this sinks in, its a race to the bottom

“ Bet you are the first at the dinner table to b1tch and moan about crime in SA…”

Seeing as you must be living under a rock and embarrassingly unaware of the status quo with regards to this, lets bring you up to speed here:

Never mind the crime, you can be assured that taxpayers are severely discontented with the current looting , pillaging and corruption that is taking place on a GRAND SCALE here in SA

This discontent is growing exponentially, as witnessed in the massive dissent on any online forum/taxpayers voting with their feet to emigrate/the growing tax revolution etc

And yes, voiced at dinner tables too !

“due to greedy landlords making a quick (undeclared) buck on AirBnB. This is particularly prevalent in Grennpoint/Seapoint…”

Childish observation….so you are damning a nationwide industry because of a few bad elements ??

“So catch a reality check, poepel.”

Ad hominem attack – usually deployed when someone has been triggered with factual arguments they cannot counter

Look up ‘Stockholm Syndrome’….looks like you might be victim to those in power here

Going after every single taxi owner could also yield a lot as they run cash businesses with impunity.

Take all the listed retailers. Shoprite, TFG, Mr Price, Pepkor etc. Start with cost of sales – audited. Enquire what % is imported. Apply the gazetted duties. When this is double the actual duties you collected – start asking questions. Rinse, repeat for alcohol and tobacco sales. The low hanging fruit is rotting around us

@JulesRab …Oh, another foaming at the mouth tax collector wannabe

Yeah, why not rip these businesses apart, who are at least:

Serving the community, employing many people so they have jobs to support their families, have many running overheads like rent, security, insurance, electricity, also having to invest in expensive alternative backup power solutions because of all the load shedding, factor in the high cost of shrinkage and shoplifting that is taking place on a grand scale, cost of cash theft at tills/cash up by staff, armed criminals inflicting cash heists, Vat needs to be paid, taxes, grinding long retail hours working 7 days a week, advertising ……the list goes on….

Yes, its so much fun going through all that stress of running a business right ?

So JulesRab, go and punish them for daring to try squeeze a little more profit to at least make it worth operating in these tough conditions, and when many of them close their doors as that last bit of profit gets taxed out, you can celebrate at last….

And all the while, the Gupta’s and an army of back slapping politicians and well connected cadre’s continue to extort and extract HUNDREDS of BILLIONS unhindered while SARS and the banks all turn a blind eye !

But lets punish the man on the street instead right !???

Pat yourself on the back for your great forward thinking there buddy

The evidence (not allegations) keep mounting up.
BUT not 1 court case, not 1 prosecution ? ?
Honest S A citizens want to see recourse. The whole Eskom debacle must be laid at the feet of the ANC. They are not fit to govern an under 8 football team let alone a Country.

As if SARS will ever go after the corrupt. It’s a well known fact that for the last 10 years the cow being milked at only approximately 3 million taxpayers. During the Zuma era with the rife corruption, paid-up taxpayers had to re-pay SARS the credit refunds for medical that was rightfully claimed. I and other family members had to re-pay the medical credits that were refunded for the 2015 period. We as taxpayers have not trust whatsoever in SARS. The only way forward will be for SARS to clean their house go after the corrupt and white collar criminals in all aspects. In fact a good way to start will be for SARS to refund the taxpayers that was rightfully theirs to claim in the first instance.

Aye Christina, you see the ANC has worked out that the small number of taxpayers are irrelevant as voters so you do not have to worry about what they want. So basically the ANC elite regime has adopted a policy of taking income tax, paying off their voters just enough with government jobs, tenders or grants then skimming off the rest. Job done until the money runs low.

Thanks for your insights, Barbara!

It’s simple . If state capture cost SA R 500 Billion then tax on this figure amounts R200 Billion .
Half of Eskoms debt ! It’s a no brainer ………or is going after it going to upset the Political Elite !
We all equal but some more equal than others ……….

All ANC MP’s and any person connected to them, as per the definition in the Income Tax Act, should be subject to lifestyle audit. The same should apply to all provincial and local authorities. Zuma and his sons would be a good starting point, and don’t forget about fringe benefits tax on the improvements to his home and interest on unpaid debt. Special attention needs to be paid to amounts shifted out of the country, to Dubai for example.

Don’t make me laugh. the low hanging fruit is the ordinary taxpayer getting squeezed more every year. The ANC elites are the forbidden fruit that nobody, not even SARS, wants to anger.

Most of us have been begging them to do this and stop wasting man hours on low income earners and their med. aid deductions. Thanks for highlighting it. Hope Kieswetter reads Moneyweb.

There must be a huge , easy opportunity for SARS to collect on donations tax – anything above 100K pa @ 20% or 25%

@ice…Really?……so keep taxing the man on the street to death, who is just trying to survive and has less and less tax friendly options as governments get more and more desperate…..right ?

While the ELEPHANT in the room keeps getting ignored

Yeah, why not squeeze that last extra paltry money from hard working taxpayers, compared to the TRILLIONS that the corrupt politicians and their cronies continue to extort and bleed year after year while SARS and government turn a blind eye !!

Yes, makes great sense …keep up the ostrich in the sand approach there – as you can clearly see, its doing wonders for our country

SMH

Reality – you miss my point. If money shows up in a corrupt crooks account or he gets a house etc free of charge – hit him with donations tax. Easy. Don’t even have to argue about income/deductions etc. Then the burden will be less on the rest of us and people like myself will not finally get so fed up that we cease our SA tax residency.

@ice

Ok, thanks for the clarification

“If money shows up in a corrupt crooks account or he gets a house etc free of charge – hit him with donations tax”

Sorry, aint gonna happen in a gangsta state

They will still nail us for every last dime…..but cadre gonna get free pass

Period

I fully endorse Barabara’s submission. As an ex SARS employee myself I can attest to the easy pickings that are out there. It doesn’t take rocket science to identify high risk taxpayers who under-declare their income.

PLEASE galvanise your ex-colleagues Billy to do just this!!

@Billy who wrote:

“It doesn’t take rocket science to identify high risk taxpayers who under-declare their income.”

Oh, you mean government and its back slapping cronies who have looted our country to the tune of ONE TRILLION+ then ?

Great !!!!!!!!!

Absolutely agree : Every year Medical expenses are audited despite year after year never rejecting anything : Their Focus is completely out :
Give a few Retired CAs a month at SARS and I guarantee Millions will be recovered .

Like Mr. Chipps did back in the day.

Increase the petrol price by R10-00 per lt. Lower the tax % . This is the only way to get everybody to pay tax. Taxi bosses, Polititions etc, Nobody can escape the price at the pump.

Politicians get free everything, including petrol. Where have you been the last 26 years.

…and add to that, remove any fuel subsidy for taxis! They can strike until their tanks run dry…

But our ANC will be too afraid to lose votes at the polls…

let’s see if they have the [insert] to do this, so far not ONE state captured/rented/leased party is doing time – word has it that mister standard 3 will be back in SA and that when he lands his fans will be there to welcome him – aint no cure for stupidity – the ANC/SARS/NPA etc don’t have it in them to do anything, instead, you and I will pay more taxes to fill those holes created by the Cuban tourist.

@Pen-Dragon….Well said !!

Glad to see there are SOME who grasp the root cause of the problem here in SA

Corruption on a grand scale is evidence of how pathetic socialism as an economic idea is.
Even taxing theft earnings is a circular effort with no benefit to government.

The US eventually closed down Al Capone on tax law, might work with the Capturers

There are professionals involved in schemes that are costing the country and taxpayer even more. The sad part is that nobody listens and the same SARS that is supposed to ensure that everyone pays what is owed, is part of it.

Use the Al Capone strategy .. criminalised his tax evasion and didn’t bother pursuing all the other nonsense. Just put him away. Do the same with all the State Capture filth – start with Regiments Capital and kick through them to Duduzane, Myeni, Gupta’s, Ace etc. Nature has already dealt with Watson – bravo Nature!

I cannot see SARS chasing “Low Hanging Fruit” as per this article.
SARS, like all government outfits, is afraid of these “entrepreneurs”. The latter simply need to indicate to SARS that violence is the name of the game. SARS will then redirect attention to harassing the ordinary PAYE taxpayer.
SARS is fully aware that the taxi industry, for example, pays little to no tax. But taxis are left alone: to do otherwise invites murder and mayhem. Same with the drug cartels, same with the construction mafias, same with top politicos, etc.

The “ANC connected so protected” culture within SARS, begun during the reign of Saint Pravin the Last-hope, still runs deep within SARS and Shamila the Somnambulent’s fiefdom.

“Now that Sars is back on track…”

Whatever gave you that idea?
A Cyril speech?

End of comments.

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