SA’s tax authority has established that SA taxpayers have assets of more than R400bn offshore, a lot of which has probably not been declared.
Tapping into this undeclared wealth would help the SA Revenue Service (Sars) in its efforts to generate the revenue needed to finance development and reduce debt.
The information about the offshore assets was gleaned through the automatic exchange of information agreements SA has with the tax authorities of other countries, said Sars commissioner Edward Kieswetter last week.
The aim of this exchange of information is to ensure that individuals are taxed on all their income.
The automatic exchange of tax information was introduced in 2014 by the Organisation for Economic Co-operation and Development working with the Group of 20 countries.
Sars started receiving offshore third-party financial data from other tax authorities in 2017. The exchange of information makes tax evasion much more difficult.
“We think there is a lot that needs to be explained in that regard,” Kieswetter said, referring to the R400bn. He was speaking at a media briefing on preliminary tax collection for 2020/2021, which generated R38bn more than was forecast in the February budget.
For the period ending March 31 2021, Sars collected a preliminarily estimated gross amount of R1.54-trillion, which was offset by refunds of R291bn, resulting in net collections of R1.25-trillion versus the estimate in February of R1.212-trillion.
“Sars is aware of an increasing number of South Africans who have financial assets offshore in banks and financial institutions in other jurisdictions … With just about 90 countries, we have this automatic exchange of information protocol and with others we can specifically request information. Through this, we are aware that South Africans have more than R400bn in offshore accounts,” Kieswetter said.
Sars was previously able to collect about R4bn from over 3,000 taxpayers who came forward under the special voluntary disclosure programme for taxpayers who had not disclosed their offshore assets and income. It ran from October 2016 to August 2017.
The commissioner said one focus this year would be wealthy individuals. This was one of the recommendations of the Davis tax committee chaired by retired judge Dennis Davis.
Davis joined Sars on April 1 to assist with the implementation of the recommendations of the committee’s report on the tax gap, which was submitted to finance minister Tito Mboweni in December.
Davis has strongly urged Sars to give attention to wealthy individuals whose luxurious lifestyles do not tally with their declarations of income and assets. He regards this as “lowhanging fruit” in Sars’s tax collection efforts.
“If you look at any tax base in any country, the highest risk and the highest opportunity for noncompliance exists with corporates and wealthy individuals,” Kieswetter said.
Sars is increasingly gathering information from third parties and from asset registers such as the National Traffic Information System, which keeps a register of vehicles, and the deeds office in a bid to reconcile an individual’s true worth and the real extent of their tax liability.
“These are generally not standard income earners but people who have wealth and either mask it through complex structures and arrangements or do not disclose it fully,” Kieswetter noted.
– Business Live