Sars net closing on millionaires

15 January, 2007 at 10:29 am | Posted in Markets | Leave a comment

Two hundred wealthy South Africans are now registered with the high-net-worth-individual unit set up last year by the SA Revenue Service (Sars) and at least another 300 will be registered this year.
These include chairmen, chief executives and directors of top firms. The identification of candidates Sars wanted to investigate in its campaign to root our rich tax dodgers was based on public information on salaries, bonuses, share options and the sale and purchase of shares by directors of listed companies. Notices of company takeovers, new appointments or the retirement of top management also provided information.

This has generated a huge workload for officials, and with Sars having made contact with more than 500 top earners, the work will grow. Edward Kieswetter, chief operating officer of Sars, said: “Typically high earners have five to 10 entities … housing their assets. So Sars is looking at between 1 000 and 2 000 entities.”

The campaign, which began last year after Sars realised that many rich South Africans pay no or very little tax, is focusing on those who earn between R5 million and R40 million a year or have net assets exceeding R75 million.

The idea is to migrate the tax files of the wealthy, which are scattered throughout the system, to the high-net-worth-individual unit to be comprehensively assessed.

Sars will first do a basic assessment of these files to determine whether any returns are outstanding or any money unpaid. “The second step is intense scrutiny of the structures they have set up and their investment strategies, to determine the value of assets and the nature of income and whether it is all declared,” said Kieswetter. “This could give rise to an audit.”

Of the 200 individuals registered, Sars is likely to audit 10. Two audits have already been completed but it is not clear yet whether these taxpayers are compliant or not, because any issues could be resolved with the taxpayer. Kieswetter said discussions at this level were usually protracted “as these are complex issues”.

South Africa has a growing number of top earners. According to the Merrill Lynch/Capgemini World Wealth Report, the number of South Africans with more than $1 million (R7.2 million) to invest rose 15.9 percent in 2005 from the year before to about 43 000. The figures for last year are not yet available.

According to the report, South Africa showed the fourth-highest increase in the number of top earners, following South Korea with a 21.3 percent rise, India with 19.3 percent and Russia with 17.4 percent.

The Tax Justice Network, which campaigns against tax avoidance, this year will launch a tax justice network for Africa, to focus on how tax policies could reduce capital flight and thus generate more tax revenue to finance development.

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