SARS’ “High Wealth Individual Taxpayers Unit” (the Unit) is up and running and as promised, SARS has sent out the first batch of welcome letters to those who meet the criteria to form part of this elite club.
What qualifies as “high wealth”?
How does SARS pick their subjects? The simplest, albeit unlikely, methodology would be to include all taxpayers who fall within the highest tax bracket i.e. those who earn more or less in excess of R1,5 million per annum, translating to more than 113,000 individuals. But the clique is probably more exclusive than that. Perhaps, those with dollar millionaire status will make the cut, which would then encompass around 38,000 individuals.
A more accurate parameter is probably taxpayers with a gross income exceeding R7 million per annum, or with gross wealth exceeding R75 million. Historically, this is SARS’ classification of high net worth individuals.
The truth is SARS has not disclosed the selection criteria, but those who fall within the parameters will know soon enough.
What can these individuals expect?
In the welcome letter SARS confirms that the recipient will be assigned a dedicated relationship manager to oversee their profile and 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.
Depending on your point of view, falling under the jurisdiction of the Unit is a godsend. 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 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.
How will the Unit go about its business?
The standard of “global best practice” is undefined and it would be interesting to know which revenue authority’s model SARS will look to replicate.
In the UK, the HNWI Unit also uses a single point of contact for every taxpayer, translating to a higher level of service and scrutiny. This division comprises specialist teams and has had relative success in improving collections.
The same unit of the Australian Tax Office uses a risk-based management approach where high net worth individuals are identified and scrutinised according to the risk they pose to the tax system.
The IRS “Wealth Squad” adopts a holistic approach to taxpayer profiles, looking at taxpayers’ earnings, the enterprises they control and any other interests they may have, locally and abroad. SARS may take another page from its US counterpart; the IRS has a Whistleblower Office that rewards informants who provide information on tax non-compliance, which has proven useful in complex tax evasion cases.
Time will tell how the Unit within SARS will conduct its business. We know that former judge Dennis Davis will be actively involved with the Unit and based on his comments, lifestyle audits will form an important part of their strategy.
Ultimately, however, the success of the Unit will depend on its resources. Hopefully, SARS managed to attract the necessary talent in its recruitment drive to stock the Unit sufficiently.