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Sars to crack down on tax avoidance schemes

Kieswetter says it plans to collect billons in what is owed to it.
Coming after its dues – Sars Commissioner Edward Kieswetter. Image: Moneyweb

South African Revenue Service (Sars) Commissioner Edward Kieswetter is looking to collect “tens of billions” in taxes from people and institutions who are deliberately hiding it from the collection agency.

Kieswetter, speaking on a Ninety One webinar on Tuesday, says Sars has come across numerous schemes to avoid paying tax and is now diligently working to not only unwind them but also to collect what’s due.

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Finding more tax revenue has become a matter of urgency for South Africa. The country was in a difficult economic position prior to the start of the Covid-19 lockdown in March, but the situation has become even worse – the economic decline has led to projected tax revenues falling R300 billion.

Successes to date

The tax authority’s work to close this gap can already be seen in it collecting about R500 million in tax from people who were not paying the tax due on the renting of second or third properties.

It was able to do so using artificial intelligence; this is where it uses sophisticated software to find patterns across different databases.

Aside from rental revenues, it has also prevented R500 million from being paid out by clamping down on export schemes where shell companies claim value-added tax (Vat) rebates, but don’t trade as businesses and just shut down after a few months.

End of the schemes

Kieswetter also notes that there has also been unusual activity in what he calls “white collar” schemes. Sars has, for example, seen instances where there were suspiciously high interest charges on the loans parent companies grant their subsidiaries.

There has also been a noticeable increase in the prices that a particular unit of a company charges another unit, which “leaves some more questions than answers”.

Kieswetter also highlights concerns of companies buying businesses that have incurred losses, which then sees the acquiring companies uses these losses not to pay taxes.

“Assessments were never created to become a tradeable asset and we see a lot of activity around the buying and selling of entities for no other purpose but require a tax loss.”

By clamping down on these types of schemes, “there are comfortably tens of billions that can be collected”.

Kieswetter says the government is not blind to the burden taxpayers are under. This is why it is looking at “broadening the base and improving compliance”.

Covid victims 

Kieswetter has to perform quite the balancing act in collecting taxes in a shrinking economy. From what he’s seen, the Covid crisis has put it on life support.

“When measured year-to-year, we see a contraction of almost 12% in employment taxes.”

Deferred taxes have played a part, but applications for retrenchments increased from 144 000 to 248 000 in the first six months and the number of unemployed has increased by over 2.2 million over the same period.

There is a similar story with local companies.

There was a contraction in company taxes of 23% over the first six months.

The difficulty can also be seen in the number of businesses applying for business rescue rising from 104 to 182, and liquidation applications jumping from 1 295 to 1 435 for the first half of the year.

Read: Dealing with Sars: Corporate SA’s experiences

Kieswetter points out that even the improvement in the trade surplus is not as good a sign as it seems because the only reason this happened is that imports fell 21%, which in turn knocked import duties about 23%.

All of this means that it will be a long time before the country’s tax base returns to pre-Covid levels.

“We are seeing an impairment of the tax base which will take a few years to recover.”

State uncaptured

Aside from taxes and the economy, Kieswetter hasn’t forgotten about the people who were in charge when the revenue service “became a victim of state capture”.

“The hollowing out of Sars was no accident. It was a deliberate attempt under a leadership who had a corrupt agenda, to do so specifically to serve their narrow interests.

“There was significantly reduced governance structure and institutional integrity.”

Kieswetter says he is watching the Zondo Commission of Inquiry into allegations of state capture very closely and is working with the various investigative and prosecuting authorities.

Kieswetter, who has been in charge of Sars for 18 months, says the tax authority is well on its way in turning itself around. It has embarked on a three-stage turnaround that saw it “exiting out” people who were believed to compromise the organisation.

Then there was a review of every single leader “to ensure that people were placed into roles that [are] more suited to their actual competence and skill set”.

It then began rebuilding and overhauling its leadership. Kieswetter says the broad leadership team went about putting together its strategic vision between July and September.

“We didn’t involve any consultants.”

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I see Mr Kieswetter is at pains to tell all and sundry what fancy, super duper, Rolls Royce third party information systems SARS uses.

But Mr Kieswetter, unfortunately you have donkeys operating your super duper systems. Just phone your call centre and meet one of them, Mr Kieswetter.

They are unfriendly, unhelpful, unresponsive, unless it suits them, and plain lazy. Not quite going the extra mile, hey, LOL.

So Mr Kieswetter, you can keep on telling us about your fancy systems, and I will keep on telling you about the donkeys that operate your systems.

Good luck Eddie & God bless.

“Sars to crack down on tax avoidance schemes”

A good place to start would be with all the ANC tenderpreuneurs, the Municipal Elite awarding “BEE” contracts to dead people and of course Mr SG himself

Second to that all the hot shots in Parastatals

Going after the tax payer is small change

That alone should bring in an entire GDP Mr Kieswetter!

sê hom Daantjie, sê hom.

Kieswetter is on a hiding to nowhere. SARS has lost any moral high ground, principally due to the ongoing cadre pillage and plunder of the fiscus. Any honest tax paying individual knows full well the product of their blood sweat and tears will be squandered, pilfered or stolen outright. Countless billions have been misappropriated in this fashion yet the legal process is toothless in the face of this onslaught. Tax morality, if one can use such a term, works both ways or not at all.

The intractable problem that Kieswetter faces is the South African socio economic environment is broken. Taxation has become nothing more than extortionate to feed the voracious ANC welfare pillaging beast. Property and person are constantly under attack from the regime and roving brigands. South Africa is the diametric opposite of a capital haven. People want to get their wealth out before it is stolen. Young professional people want to externalise their wealth generating capability i.e. themselves. The ANC lack the testicular fortitude to take on the taxi industry or the criminal element infesting their ranks. Instead they will go for the soft targets. The latter will simply result more of the same. A devalued rand tax take falling over the edge of the Grand canyon. It’s a long way down, Mr. Kieswetter.

True Richard, his waffle means about as much as Cyril’s. Like Gordhan whose true thieving colours have emerged with the SAA debacle, Kieswetter is just anothey bullying bagman for the ANC elites, getting a thrill from threatening law abiding taxpayers. Despite his bluster he completely ignores the state capture beneficiaries, in fact fights to keep their tax affairs secret; why?

Good luck chum; I suspect that the low hanging corporate fruit is plucked, he may extort a few tens of millions but private sector accountants and lawyers may be too smart for the ANC apparatchiks.

Let me give you a hint, you bullying thug, start showing some respect for the core revenue provider, the individual non-government employee, rather than trying to make him fear you. Then we may have a shred of respect for you and your mafia systems.

testicular fortitude – love it! 🙂

Best comment in a long time (and you beat me to it!)

Richard your comments are like polished gems.

This is the story of Africa. There are opportunities for those who have the right strategy. The collectivist mindset is highly destructive to economic activity and social cohesion, but the individuals who are able to navigate the rapids will experience opportunities. With superior strategy, the small force of 460 Voortrekkers overpowered a highly motivated and disciplined army of 15 000 brave fighters. On the flip side, the same amount of brave and well trained Zulu fighters overran the British force that was 3 times larger, and better-equipped than those of the Voortrekkers. The Voortrekkers had a lot of experience fighting the Border Wars; therefore, they knew their enemy. The British forces did not.

The same phenomenon that determined the difference in outcome between the Battle of Blood River and the Battle of Isandlwana will also determine who wins and who loses in the current political-economic situation. The individuals who know, and understand the political terrain, who know their own strengths and weakness, as well as the strengths and weaknesses of the “enemy”, will always be successful, no matter where they live. We have to spend most of our efforts on strategy.

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ― Sun Tzu, The Art of War

at the beginning of 1879 Paul Kruger was on his way back from London having once again tried to get concessions out of the Brits concerning the Transvaal’s independence. He stopped over in Pietermaritzburg on his way to Pretoria. He advised the British troops very strongly to use a laager at night and when large concentrations of Zulu were in the area. The old man stressed his experience in fighting from an early age and the incredible speed with which the impis could move. His advice was not followed and the rest is history. Fact.

The regime is getting more and more desperate for money to steal. A raid on pensions is imminent.

Such a shame that those who spend the tax are not as diligent!

Start with those that avoided paying tax on I’ll gotten corruption monies, like the ANC cadres.

Then go to the cigarette and alcohol smugglers.

Then those doing cash sales. For example the cash and carry businesses and anyone where more that 2% of the sales are cash.

And the “Cash Stores” and Chinese junk stores opening everywhere ?

Kieswetter it’s Wealthcraft here.

Why all this posturing about what you are gonna do?

Are you aware that the tax payer is morally obliged to pay the minimum amount of tax?

Bring your artifical intelligence gizmo on. Right now some guy is working on another gizmo to countermeasure your gizmo. In the end there will be parity between tax authorities and the tax genocide victims.

Did you declare war on taxpayers? If so then expect pushback from the tax payers. Tax consultants wait for you to open your mouth or produce a policy and guys like me approach them for solutions to an eternal problem.

The tax payers response will be subtle and asymmetrical. There is one kind of tax avoidance you will never contain. It’s called the underground economy. They are the tax guerillas, like the Viet Cong who render your gizmo obsolete.

For the record, I pay minimum taxes. That’s all you get from my money. I will spend money to defend that minimum amount. This, Kieswetter, is personal.

Salute! my fellow “freedom fighter”. The small group of taxpayers in this country are taxpayers because they are innovative, to begin with. It requires great skill, focus and effort to turn a profit or to earn a good salary. No skills, focus or effort required to earn a salary as a Cosatu member or to receive a social grant. Therefore, the entire political-economic system that motivates the collectivists to plunder the taxpayer also incentivises taxpayers to strategise against SARS.

Please also indicate how much tax has been recovered from taxi operators as I’m sure that must run into billions, once penalties and interest has also been applied.

The entire R100bn taxi industry is a tax avoidance scheme.

Just broaden the tax base!

There is 50million (out of 58mil population) that is eagerly awaiting to carry their part.

Do we have to pay all these grants?

Nope Mr Kieswetter, the REAL problem is the State IS TOO LARGE in relation to the (now halved) economy!
Govt can cut their expenses in HALF. Sorted.

@Michael SARS only has to look North East for a working solution.
The small nation of Georgia has a simplified tax system.

Contrary to belief people are more than willing to pay tax but make to complicated and return only 50 or less services then they will revolt.

For many of the readers here it’s the final warning shot to get out of SA of be taxed into poverty.

https://investingeorgia.org/en/georgia/taxation

Absolutely….yes, am aware of Georgia…the Eurasian country with almost zero crime. Tbilisi safer than most western European cities.

Dawie Roodt visited the country with his wife & has interesting (real) stories.

Tbilisi’s Public Service Hall would put any SA govt dept to shame: passports are renewed within an HOUR, if you pay a nominal priority fee.

Even the Indians became “jealous” of Georgia’s well oiled Public Service Hall setup:

https://www.financialexpress.com/opinion/ease-of-doing-business-why-india-should-adopt-a-georgia-like-public-service-hall-model-to-boost-its-smart-city-initiative/693761/

Go and get the tax from your cadres that stole over a trillion.

It was stolen in their personal capacities and knowing the huge salaries they all get they should all be in the top bracket.

So there you go Eddie. At least R500 billion.

So go and do some work and leave the speeches and webinars to others.

Being broke as the country is, it just stands to reason to TAX TAX TAX TAX TAX just like a good socialism strategy before the country goes bust

The more tax money is collected = more to be looted/wasted.

The state’s income needs to be halved…..and without corruption, the govt would manage fine.

This must be one of the best extracts of comments ever… “The ANC lack the testicular fortitude to take on the taxi industry or the criminal element infesting their ranks.” (Richardthe Great – comments on this article: “SARS to crack down on tax avoidance schemes”

….the ANC has “zero balls” in Blue Bulls speak 😉

Kieswetter going after the small fish again. There is a reason why people evade tax you know! One of them being protecting your money from wasteful and corrupt state expenditure. The French Revolution is a classic example of the result of tax misappropiation. Kieswetter will get pocket money back from the corrupt elite. The money is gone and spent!No one has been seen any consequence to their actions, merely dismissed or ported to another department. Is Tom Moyane still running around free? Yes.
So Mr K can put all his fancy systems in place but this will not replace common sense required by staff. Its not something you can learn at university.

Why doesn’t SARS investigate every person (mostly tender babies) who buys a vehicle cash… You will collect billions!

So many big issues, but they still find time to pick through my pile of scanned R33 prescription stubs. I feel honoured. Also helping them by sending proof of the stuff the banks have prepopulated in my return. Gotta watch those banks, Ed.

Save for VAT (which would be theft), I regard tax evasion and avoidance as my civic duty. After all, would one give an alcoholic more booze? No. Why would I give kleptomaniacs more money? Come and pry it out of my dead fingers Kieswetter!

If SARS starts with the same eager to pursue those implicated at the Zondo commission as with ordinary taxpayers, I might have faith in Mr Kieswetter. Somehow I think that faith will fail me.

Start with the Zuma brood.

Although I don’t believe in the sars system effectiveness I can see that Mr Sars and his management have had a great idea !…. so they can start with Jakob Zuma and his troops of loyal corrupts !

The mighty SARS that fails to see ill gotten mansions and luxury sports icars.

The mighty SARS that failed to see millions leaving the country while we the law abiding tax paying citizens travel on roads full of pot holes like peasants.

Seemingly, there is a number of good suggestions in this comment section? Time will tell.

But Eddie how can investing in a loss making entity for a tax loss be an issue ??
If my fellow businessman lost significant sums and incurred a tax loss due to BEE entity taking over his market, how is me taking his endeavors’ over as seen us unlawful, and using his legislated misfortune to be an advantage, yet the opposite are legislated ..

Should you not complain to your political masters??

Lets extrapolate this thought further, EWC aka theft of land..
If a farmer looses his land to ewc, how can i buy a portion of his losses in land/turnover etc (i will honor ubuntu and give him something) and incur a loss as well, this way Eddie you help to pay for the injustice which we “legislate ”

Dont have the awnser yet, but sure there are a way to pillage together, someone will get this angle…

Mr Kieswetter, I feel sorry for you about some of the remarks made by other commentators, but can’t really blame them.
Noting your concern about companies buying loss making businesses to use those losses to avoid paying tax. Not a bad scheme – much like me as an individual taxpayer watching as you pour my taxes into a loss making government – except I don’t get to write the government’s losses in wasteful expenditure off as a loss against my taxable income.
I know it’s not your job to tell your colleagues in government to behave themselves. So the next time someone asks me if I’ll pay cash and forego an invoice, I’ll gladly oblige. Its not my job to tell him/her to do the right thing.

@Kieswetter – Stop talking and start Arresting people who avoided taxes and were linked to STATE CAPTURE (e.g. JG Zuma)
Lets see some strong action!

Larry and/or Kieswetter should go back to finance school and study the difference between tax avoidance and tax evasion.

Anyone deliberately hiding tax commitments is EVADING tax, not AVOIDING tax.

That said, anyone paying income, business or death taxes in SA is doing so voluntarily as these are all legally avoidable.

Yea, good luck unraveling the complicated tax schemes with the few remaining bright sparks left at SARS, trying to keep the lights on. Add to that the majority of staff “working” from home, I bet many without their own laptops or data, and one can imagine how long it’s going to take to catch up. On the other hand, SARS could be looking at the billions lost to corruption… a bit of firm action in that department could win back the loyalty of taxpayers.

What great comments – it’s been a pleasure and a laugh to read them all.
One thing about us tax paying South Africans is our resilience and sense of humor….No wonder it’s hard for us to leave for greener pastures! Without these things we would have left at least twenty years ago!
And judging by the comments here – you are all hard working taxpayers for which I thank you. It would be very lonely to think I was the only one who was “ gatvol“
Keep the lights on folks …..

Can understand why Kieswatter despises us cheating, conniving, thieving SA tax payers; his colleague Pravin Gordhan, told Scopa in parliament yesterday the R10,5bn bailout (yes Mr Mboweni, BAILOUT!) was probably NOT the last! It’ll be gone the minute it’s paid -once the airline hits the skies, more bailout will be needed!
So can we blame Kieswatter? He IS afterall, like Gordhan, one of the cadres….and we’re all working to keep the SAA scheme alive with more bailouts!

Kieswetter is suppose to make SARS more acceptable to the tax paying public but he is failing and is trying anything to boost tax collection to keep him in the job. He is under the same ANC restraints to collect tax from their cadres therefore clamp down on the 1% tax payers, it is much easier. At least with Tom Moyane a legitimate tax claim was accepted and and honored, with Kieswetter all legitimate medical claims not showing on a medical aid certificate is rejected and has to go through the SARS processes of Request for Reasons and then Notice of Objection without any success. We all have to pay a so called patient admin levy with many doctors today which the medical aid simply rejects, these are valid medical expenses to see the doctor and get treatment, SARS rejects them as well.

End of comments.

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