Through close collaboration with the Financial Intelligence Centre (FIC), the South African Revenue Service (SARS) has been able to assist in stopping financial crimes, particularly in the form of non-compliance.
The FIC’s latest annual report showed that a total of over R41.6 million in penalties were imposed by SARS and the FIC on certain South Africans and/or their businesses – many a result of non-compliance with tax provisions.
Finance minister Enoch Godongwana said that pooling multiple authorities together is crucial to the country’s fight against financial crime. He stressed that the following money flows are critical in uncovering individual and syndicated crimes.
In the taxman’s latest annual report, the commissioner of SARS, Edward Kieswetter, said that the service would continue to focus on implementing recommendations on the tax compliance of companies and high-wealth individuals (HWI).
The report found that SARS had recovered R8.2 billion in revenue from criminal and illicit activities in the 2021/22 financial year. This figure was up more than 331% when compared to the year before – indicating an increase in the services capacity and strict direction.
Elle-Sarah Rossato, a PwC partner, specialising in tax controversy and dispute resolution, said, in the financial services firm’s recent Taxing Times Survey, that SARS has a strategic objective to detect taxpayers and traders who do not comply and make non-compliance hard and costly.
Rossato added that SARS aims to increase and expand the use of data within a comprehensive knowledge management framework to derive deeper insight and improve outcomes. One of the ways the service aims to use data to its benefit can be seen in its endeavours to probe into finances with new methods.
According to Kieswetter, the revenue service is stifled by legislation and is in search of new methods to look into taxpayers with the following items and assets:
- Luxury vehicles
- Luxury Properties
- Beneficial ownership
The service is currently trialling a new method of investigation called Unexplained Wealth Orders (UWO).
In August, it was announced that the National Prosecuting Authority (NPA), Directorate of Priority Crime Investigation (DPCI), Department of Justice (DOJ) and the South African Revenue Service (SARS), led by the Financial Intelligence Centre (FIC), would collaborate on a joint project to deprive those who support their lifestyles with ill-gotten gains from their unexplained wealth.
The initiative being piloted would make it more cost-effective, faster and easier to investigate and recover assets acquired through suspected unlawful activities such as corruption, fraud, tax evasion and money laundering.
The order allows for SARS to confiscate unexplained wealth and assets that stem from it. Unexplained wealth, according to SARS, is wealth that is out of proportion to the legal income that a person or entity has declared or derived – and is unable to reasonably explain.
SARS said its departments would be looking into assets suspected to have been acquired through:
- Corruption;
- Fraud;
- Tax evasion; and
- Money laundering
PwC noted that SARS had established a dedicated High Wealth Individuals (HWI) task team alongside an Illicit Economy Unit. The HWI team will look into the financial statements of individuals with gross assets worth R75 million.
Jashwin Baijoo, the legal manager for Africa Tax & Compliance at Tax Consulting South Africa, said that the task team would detect HWI taxpayers who do not comply with tax legislation.
“Continued focus will be on increasing our capability to improve debt collection, implementing various recommendations on the tax compliance of companies and high wealth individuals, fast-track criminal investigations and counter illicit practices, as well as shaping the policy and approach to increase revenue collections and service to the informal economic sector,” said SARS commissioner Edward Kieswetter.
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