Super-rich tax dodgers beware

2013-03-03 10:00

The taxman is out to catch thousands of rich tax dodgers who ­get out of paying what they owe.

Lifestyle audits are on the cards for 2 300 “high-net-worth individuals” with a combined income of more than R7 million, but whose wealth exceeds R75 million.

A briefing note from the SA ­Revenue Service (Sars) reads: “As part of its focus on high-net-worth individuals, Sars will this year test the levels of tax compliance of 1 208 directors of large corporates, which will provide an indication of the compliance behaviour of the companies they manage.”

The document also reveals Sars is concerned about suspicious under-declaration of income.

“To date, 476 ­potential wealthy individuals have been identified where there are discrepancies between their asset base and declared income, and they can expect much closer scrutiny from Sars,” the document reads.

Sars spokesperson Adrian Lackay says they have identified a number of other entities for failing to comply with tax regulations.

These include large businesses, construction companies, traders of contraband cigarettes, importers, and tax practitioners and trade intermediaries.

The super-rich often used trusts and companies to hide their wealth, the note reads, and most wealthy South Africans Sars reviewed were linked to more than 10 companies on average.

Nearly 90% of those companies and almost 60% of those trusts had outstanding tax returns.

Sars’ main concerns include:

» Undeclared fringe benefits;

» Input VAT being claimed ­without declaring VAT on trade ­income;

» Artificial losses and deductions;

» Structuring salaries in ways to avoid tax;

» Diverting assets and income through associated entities; and

» Trying to pass off profits as capital.

Dr Dick Forslund, an economist and researcher at the Alternative Information and Development Centre, said research the centre has conducted reveals that there were more than 44 700 super-wealthy individuals cheating the taxman.

In his budget speech this week, Finance Minister Pravin Gordhan said Sars would pursue tax cheats at all costs.

“We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country’s infrastructure and resources without paying their fair share of the costs,” he said.

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