SARS’S noncompliance focus brings in billions in extra tax

A NUMBER of areas identified by the South African Revenue Service (SARS) for noncompliance a year ago have yielded several billions of rand in additional taxes, including R3.2bn from the finalisation of 14 transfer-pricing cases.

SARS commissioner Oupa Magashula gave initial feedback on Tuesday on the progress made on the priority areas identified for the next four years. These include transfer pricing, rich South Africans and their trusts, the construction sector and small businesses.

SARS has conducted 62 audits on high-net-worth individuals in the past year, yielding extra tax revenue of R184m and resulting in 14 people being identified as “potential serious offenders”. Four criminal cases are under investigation.

Transfer pricing refers to how multinational companies price crossborder loans, royalty payments and management fees within a group. The arm’s-length principle should be used to determine prices.

Mr Magashula said at the announcement of the preliminary outcome of revenue collection for the 2012-13 fiscal year that SARS would increase the resources it had focused on wealthy South Africans and their trusts.

SARS has also done compliance reviews and analysis of 280 wealthy people with gross incomes of more than R7m and/or whose gross wealth exceeds R75m, and 109 have been identified for a full audit.

Mr Magashula finds himself in the midst of an investigation following media reports over an alleged jobs-for-friends scandal after a telephone recording of him allegedly offering a young woman a job at SARS was reported in the media.

Finance Minister Pravin Gordhan announced on Tuesday that retired Constitutional Court judge Zak Yacoob and Muzi Sikhakhane, the elected group leader of the Victoria Mxenge group of advocates, will handle the inquiry.

Press reports implied that convicted drug dealer and businessman Panganathan Marimuthu had influence over Mr Magashula.

The two-man probe will have to submit a report to the minister within the next two months.

Werksmans tax head Ernest Mazansky said SARS was one of the country’s best-functioning state institutions, with a world-class information technology system. However, it seemed as if there was an “unflinching” approach to the “pay now, argue later principle” even if a company met several of the requirements to have its payment suspended when there was a dispute over an assessment.

“It seems as if there is no allowance on the part of SARS that they might have made a mistake. The vast majority of taxes are properly, correctly and efficiently collected, but there are a significant number of instances where SARS acted in a heavy-handed manner that may cause resentment in the long run,” Mr Mazansky said.

Mr Magashula said transfer pricing remained one of the “rich pickings” for tax authorities around the world. He said SARS had finalised 14 cases bringing in additional tax of R3.2bn. The taxman was still involved in several cases with a potential yield of R6bn.

SARS has also conducted 88 audits in the construction industry with a yield of about R380m in the previous fiscal year.