DA welcomes lifestyle audits

2010-04-07 17:03

Cape Town - The Democratic Alliance has welcomed the lifestyle audits carried out by the SA Revenue Service (Sars) on individuals suspected of tax evasion.

In a written reply to a parliamentary question by the DA's Dion George, Finance Minister Pravin Gordhan said Sars had conducted 4 787 lifestyle audits since 2007 on individuals suspected of tax evasion or tax fraud.

The audits had led to 234 criminal prosecutions, Gordhan said.

"The DA welcomes this use of this mechanism," George said on Wednesday.

"In fact, the powers and scope of lifestyle audits must be expanded to such a level that all individuals are made equal before the law.

"The worrying trend of what appears to be blatant tax evasion by prominent ANC members cannot be tolerated, and this is the ideal way to clamp down," he said.

Not politically motivated

Gordhan's answer confirmed that lifestyle audits were not a politically motivated new idea, but longstanding best auditing practice employed by Sars.

"The next obvious step is to investigate senior government and ANC officials who seem to be involved in serious tax evasion, like (ANC Youth League leader) Julius Malema.

"The DA applauds Sars' approach, but it will only be in the interest of a free and democratic society if the lifestyle audits are truly conducted across the range without fear or favour to politicians from any particular party factions," he said.

In his reply, Gordhan said as part of the risk-based approach used by Sars to identify and investigate non-compliance with tax and customs laws, risk-profiling was applied to all tax entities (individuals and businesses) and across all tax types or tax products - Personal Income Tax, Corporate Income Tax, Value-Added-Tax and Customs and Excise duties.

As part of the risk-profiling of individual taxpayers, Sars used a variety of sources of information including third party data and risk rules that assisted in identifying potential discrepancies between the income declared by taxpayers and the income and assets they were thought to have.

Where such a potential discrepancy was identified, a taxpayer was selected for audit.

A Sars income tax audit of an individual comprised various activities by a Sars auditor that primarily relied on the obligation of a taxpayer to honestly declare income, assets and liabilities in a standard periodic return to Sars on the one hand, and then to systematically examine and verify records or books of account, transaction records and any other relevant documents in relation to what was declared by the taxpayer on the other hand.

Where a discrepancy was then identified by the Sars auditor, this was usually followed up with further engagements between Sars and the taxpayer.

Where discrepancies had been confirmed, the Sars auditor would then typically issue an additional assessment to take into account income not previously considered, and would usually have an interest consequence and additional tax consequence.

In addition, under certain circumstances, penalties could also apply.

Living standards

In essence, the practice of reviewing the "lifestyle" of a taxpayer from a tax audit perspective, related to the comparison of the taxpayer's apparent living standards and assets and liabilities obtained from third party data-sources against the values of income and assets declared in the tax return by that taxpayer.

"This process is one of many tools available to a Sars auditor when executing the audit process, and usually served to highlight areas of risk that could require verification or clarification.

Another tool at the disposal of an auditor was the so-called "lifestyle questionnaire" which enabled a tax auditor to pose additional questions to a taxpayer beyond what was normally required in a tax return.

The questionnaire was designed to rely on the obligation of a taxpayer to honestly and truthfully declare to Sars to enable Sars to determine whether all income had been declared or not.

On average, Sars selected about 68 000 individual taxpayers for audit each year.

In a small percentage of these cases, the audit process identified further risks warranting criminal investigation.

On average, Sars conducted about 1 500 investigations of individual taxpayers a year.

There were currently about 1 480 cases that had been handed to the National Prosecution Authority for consideration for prosecution, he said.

Read more on:    da  |  sars  |  julius malema  |  pravin gordhan  |  politics

Read News24’s Comments Policy


Inside News24


Joburg hot spots for cocktails, craft beer, tapas and wine!

It’s the season to be jolly – so we’ve rounded up some new Joburg hot spots!


I love summer.24

The craziest deaths of 2014
How to make this a sensual, sexy summer!
This is what South Africans Googled in 2014!
This hilarious song is your new holiday anthem

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Kalahari.com - shop online today

2DAYS ONLY – 30% off Appliances

Coffee makers, blenders, fans, juicers and more. T&Cs apply. Shop now!

2 DAYS ONLY – 40% off books

Get 40% off when you buy 2 books. For two days only! T&Cs apply. Buy now!

Up to 50% off on outdoor gear

Save on chairs, blankets, cooler bags, umbrellas and more. Shop now!

Save on Samsung

Cameras, mobile phones, TVs, Tablets and more. While stocks last. Shop now!

Grand Theft Auto 5

Now available on PS4, Xbox One and PC from R649. Buy now!

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25


There is so much going on around you and inside your head. You may want to take your ideas to the next level. Romance may be...read more

There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.