It has been widely reported that SARS has committed to probing the tax affairs, and information disclosed by high-net-worth individuals (“HNWI”) on their tax returns, in order to determine their compliance with the respective tax legislation, with the establishment of the High Wealth Individual Taxpayer Segment (HWI).
The gravitas of this commitment by SARS should not be taken lightly by HNWI, particularly if your lifestyle on social media is not reconcilable with your declared tax information which may result in a one-way ticket to jail in light of the recent amendments to Section 234 of the Tax Administration Act No.: 28 of 2011 (“the TAA”).
Are the wheels of Justice already turning?
It has recently been proven that SARS’ teeth have been sharpened to mismatch declared income and the apparent tax liability owed to the fiscus, when SARS successfully obtained a preservation order in the Pretoria High Court against the luxury-car-loving businessman, Thabiso Hamilton Ndlovu, who had taken to social media to flaunt his recently acquired vehicles to the value of R10,5-million which did not sit well with SARS officials.
SARS, in obtaining the relief against the taxpayer, did not rely on the legality of the business or the tenders awarded to Ndlovu or any of the associated companies, but rather on the gross non-compliance with the respective tax legislations by the taxpayer. The information available to SARS, including photographs of the vehicles of the taxpayer on social media, could not be reconciled with what was declared by the taxpayer, which gave rise to the investigation of Ndlovu’s tax affairs, and SARS seeking justice from the courts.
The acting Deputy Judge President of the Gauteng division, Roland Sutherland, noted the following in respect of Ndlovu’s tax compliance:
“The delinquency in the rendering of the tax returns is an obvious and strong indication that the taxpayer is, at best, irresponsible and, at worst, is hiding income. When the conduct occurs over several years the inference of deliberate resistance to the payment of tax becomes even stronger.”
It is expected that SARS will apply the same methodology, including reviewing taxpayer’s social media accounts, when considering the tax affairs of HNWI, and where there is a want for compliance with the respective tax legislations, SARS will act accordingly, and the courts do not take non-compliance lightly, as can be seen in the Ndlovu matter.
A specialised unit to “follow” taxpayers
In obtaining the goals set out by SARS to scrutinize HNWI and possibly their social media, SARS established the High Wealth Individual Taxpayer Segment (HWI), a specialised unit with an allocated budget of R3 billion to investigate and conduct specialised audits on HNWI, which may then lead to lifestyle audits and further criminal investigation. Therefore, it came as no surprise that SARS published vacancies on Saturday 27 March 2021 to call on 370 highly skilled, experienced and result driven specialist to apply to work at SARS.
These individuals will be specialised auditors with a specialistion in Customs / Financial Structuring and more importantly High Wealth Individuals, and criminal investigators, which is evidence that SARS is of the intention to bring these HNWI to book where there is a lack of want of compliance.
This unit, empowered by the recent amendment to Section 234 of the TAA, now only needs to prove that a taxpayer’s non-disclosure was negligent, compared with juxtaposition of proving intentional non-disclosure to criminally charge a taxpayer.
You Can Run But You Can’t Hide
As alluded to in the 2021 Budget Speech, SARS has already identified certain HNWI and they may, as early as April 2021, receive letters from SARS. SARS will be gentle in their initial engagement upon their discovery of your non-compliance to remain fair, however, with April on our doorstep, it is advisable to immediately seek guidance from a tax attorney to avoid an orange jumpsuit and regularise your tax affairs through the Voluntary Disclosure Programme (VDP) under the TAA, where applicable.