The country’s finance minister Pravin Gordhan confirmed that the SARS has taken steps to improve income tax compliance among high net worth individuals (HNWIs) in reply to a question in the National Assembly.
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To a query on the measure taken by the National Treasury to recover the US$6.4 billion owed to SARS by 9,300 of the country’s HNWIs and registering almost 7,000 of those people with a gross income of more than ZAR7 million as taxpayers, he said that the figure reported by the media was an estimate of gross income rather than tax due, and was based on a statistical extrapolation of third party data.
Gordhan opined about the inability to accurately estimate the potential tax liability of the HNWI group due to the uniqueness of each case.
He attributed uniqueness to income being held in trusts, companies or other structures in some cases, while income was being derived from dividends or capital growth rather than remuneration in some cases, thereby qualifying for a lower rate of taxation.
In order to identify failure to register as a taxpayer, undeclared income and a variety of other forms of noncompliance, SARS will use its own data and rely on date from third parties.
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By GlobalDataIn the mean time, SARS has also commenced audits and investigations on a number of HNWIs and their associated entities, such as trusts and companies.
Currently, South Africa has 70 double taxation agreements and five tax information exchange agreements in force that provide for the exchange of information with other jurisdictions.
Apart from the agreements, SARS has also commenced joint audits with jurisdictions, such as Botswana, the UK and the US with respect to HNWIs, and the legislative framework has been modified to limit arbitrage opportunities and close loopholes.
"We are going to be deploying resources towards getting these wealthy individuals who are abusing the trust. We will be getting to them, it’s just a matter of time," remarked Gordhan.
