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SARS Risks Pushing Wealthy Taxpayers To Take Their Money Out Of South Africa

Omotayo Daranjo by Omotayo Daranjo
September 18, 2021
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The South African Revenue Service (SARS) has established a ‘high net worth division’, focusing on South Africa’s wealthiest taxpayers and ensuring they fully comply with the country’s tax laws.

However, a new survey by professional services firm PwC shows that the many of country’s biggest taxpayers believe the unit is unlikely to make much of a dent in closing the country’s tax gap, and that the increased targeting could be the final push for many wealthy taxpayers to instead take their money out of South Africa.

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The survey considers corporate taxpayers’ experiences with the South African Revenue Service (SARS) over the last year. A total of 159 companies participated in this year’s survey, with much of the focus on the leadership of SARS under commissioner Edward Kieswetter and whether the revenue collector has improved its services.

Around half the respondents (47%) said that the new high net worth unit would assist in closing the tax gap, while 36% said it wouldn’t. 16% of respondents indicated that they believed that the unit would ‘somewhat’ assist.

The respondents noted that although some high net worth individuals are out to avoid or evade tax, SARS can’t rely on only a small percentage of taxpayers to close the tax gap, PwC said.

“Taxpayers believe that we need to retain the few high net worth individuals we have in South Africa and incentivise them to invest in the country.

“At the same time, SARS must ensure that they are not driving people out of the country. SARS also needs to increase the number of taxpayers at the bottom end.”

The respondents said that SARS should also widen the tax net and assist entrepreneurs – and that basic tax principles should be taught in schools.

High net worth unit

SARS announced its new high net worth unit at the end of February 2021, with the unit set to focus on ‘wealthy individuals with complex financial arrangements’.

The unit has subsequently sent out ‘welcome letters’ to some of these taxpayers, confirming that the recipient will be assigned a dedicated relationship manager to oversee their profile, who will serve as their direct point of contact.

“Seemingly, the unit will operate in a similar fashion to the large business centre, almost like having a private banker for your tax affairs,” said Jean du Toit, head of Tax Technical at Tax Consulting SA.

While some South Africans will be nervous about increased targeting from SARS, du Toit said that falling under the unit’s jurisdiction could be a godsend depending on your point of view.

“Others may see the notice as dooming, although it is phrased in the spirit of collaboration. Perhaps, unless you have something to hide, your experience with SARS may vastly improve.”

SARS also promises that the unit’s service offering will be informed by “global best practice”, to ensure it delivers on its mandate.

“This is encouraging or unnerving, depending on who you ask. It serves to note that while the unit aims to excel in its service delivery, it has been established primarily to enhance compliance among and increase collections from this segment of the tax base.”


Tags: out of south africariskSARStake moneytaxpayers

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