No good news for wealthy tax avoiders in 2012

With few changes to tax brackets expected in the 2012/13 Budget, SARS will increase its focus on non-compliant taxpayers, especially high-net-worth individuals.

“We expect Treasury to make it very clear that it will target wealthy individuals who are not tax compliant in a bid to increase tax collections,” says Elzahne Henn, Associate Director at global audit, tax and advisory company Mazars.

Worldwide, high-net-worth individuals pose significant challenges to tax administrations, she says. “While their contribution to revenue is potentially substantial, they have the means to get involved in complex transactions and aggressive tax planning schemes. Generally they’re internationally mobile, have multiple business interests and spread their assets across a range of local and foreign entities, including trusts or trust-like instruments.”

In a recent briefing note, SARS states that it has identified approximately 2,800 individuals who meet the criteria for high-net-worth individuals. This includes earning a gross income of more than R7 million a year, or owning assets in excess of R75 million. Currently there are only about 360 individuals in this category actually registered with SARS. A number of individuals have been identified who own luxury private planes in excess of R20 million, property in excess of R30 million and luxury cars including Lamborghinis and Ferraris, the majority of whom appear to earn incomes that are not reconcilable with assets registered in their names.

SARS is boosting its resources with experienced auditors and risk analysts in their high-net-worth individual investigation units and investing in the latest technology. In addition, there has been a rise in collaboration and information sharing amongst tax administrations. In the coming financial year SARS will focus its attention on the 200 most non-compliant high-net-worth individuals.

“Taxpayers whose lifestyle and assets don’t match their declared income SARS shouldn’t expect any good news from the Receiver in 2012,” Henn concludes.