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The Tax Service of South Africa (SARS) is committed to investigating tax matters and information disclosed by High Net Worth Individuals (HNWIs) on tax returns, to ensure that they actually comply with tax laws.
The seriousness of this commitment by SARS should not be taken lightly, said Jean-Louis Nel, legal manager at Tax Consulting SA, particularly if your lifestyle on social media is not compatible with your declared tax information.
This could result in a one-way ticket to jail in light of recent amendments to Section 234 of the Tax Administration Act, he said.
“It has recently been shown that the teeth of SARS have been sharpened so that the declared income and the apparent tax liability owed to the fiscus do not match when SARS successfully obtained a preservation order in Pretoria High Court against the food-loving businessman luxury cars, Thabiso Hamilton Ndlovu, who had taken to social media to flaunt his recently acquired R10.5 million vehicles, which did not sit well with SARS officials. “
The SARS, when obtaining the relief against the taxpayer, was not based on the legality of the business or on the bids awarded to Ndlovu or any of the associated companies, but on the flagrant breach of the respective tax legislation by the taxpayer, Nel. saying.
“The information available to SARS, including photographs of the taxpayer’s vehicles on social media, could not be reconciled with what was declared by the taxpayer, which led to the investigation of Ndlovu’s tax matters, and SARS sought justice in court. “
Gauteng Division Chief Deputy Judge Roland Sutherland specifically pointed to Ndlovu’s posts on social media and the issue of tax compliance.
“Late filing tax returns is an obvious and strong indication that the taxpayer is irresponsible at best and is hiding income at worst,” Sutherland said.
“When the behavior occurs over several years, the inference of deliberate resistance to paying taxes becomes even stronger.”
Nel said SARS is expected to apply the same methodology, including reviewing taxpayers’ social media accounts, when considering HNWI tax matters.
“And when there is a need for compliance with the respective tax law, SARS will act accordingly, and the courts will not take non-compliance lightly, as can be seen in the Ndlovu case,” he said.
A specialized unit to “follow” taxpayers
Upon obtaining the targets set by SARS to scrutinize HNWIs and possibly their social networks, SARS established the High Wealth Individual Taxpayers (HWI) Segment, a specialized unit with an allocated budget of R3 billion to investigate and conduct audits. specialized information on HNWI, which can then lead to lifestyle audits and further criminal investigation.
“It was therefore not a surprise that SARS posted vacancies on Saturday, March 27, 2021, to call 370 highly trained, experienced and results-oriented specialists to apply to work at SARS,” said Nel.
He said that these individuals will be specialized auditors with a specialization in customs / financial structure and, more importantly, high-wealth individuals and criminal investigators, which is evidence that SARS intends to put these HNWIs on hold. where there is a lack of need. compliance.
“This unit, authorized by the recent amendment to Section 234 of the TAA, now only needs to prove that a taxpayer’s nondisclosure was negligent, compared to the juxtaposition of proving intentional nondisclosure to criminally charge a taxpayer.”
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