Sars planning to plug R1-trillion shadow economy drain

The taxman has gone into sleuth mode to uncover those involved in South Africa’s growing shadow economy.

With estimates putting the illegal economy at roughly R1trillion, or 20% of gross domestic product (GDP), the SA Revenue Service is researching the extent, reach and impact of the black market on the country.

The GDP is an estimated R4.3-trillion. Sars enforcement chief officer Viwe Mlenzana said the research was set to conclude in March 2020.

“A recent report by ACCA, the global body for professional accountants, estimates South Africa’s shadow economy is expected to rise to 24% of GDP by then [2020],” Mlenzana said.

Based on these and other figures, Sars had recently launched a study to try to quantify the size of the illicit economy.

The research is to be conducted by units shut down by disgraced former Sars commissioner Tom Moyane, including the big business unit and the illicit economy unit.

The units were reformed in August and their first tasks include investigating roleplayers involved in the illicit economy.

Mlenzana said it was difficult to gauge how much SA had lost since the loss of Sars’ enforcement capabilities.

“Fortunately, these capabilities are back.

“With the current government, there is political will to stem the tide of these losses.”

He said they had prioritised high-risk areas.

“The underground economy operates outside of the country’s rules and regulations and is linked to organised crime.

“Globally, illicit trade is a growing problem, involving money and goods.

“It includes human trafficking, environmental crimes, the illegal trade in natural resources, intellectual property infringements, the smuggling of excisable [taxable] goods, the trade in contraband and illicit financial flows.”

These activities had a wideranging impact, including political and social harm.

Mlenzana said a 2019 report by the Global Financial Integrity research agency, using International Monetary Fund (IMF) data, showed SA had lost an estimated R143bn, at current exchange rates, through illicit financial flows.

“To defeat these crimes [dealing in contraband] and stop illicit financial flows, it’s essential that relations are strengthened with both international and national partners, including government agencies such as financial intelligence units, the police and customs administrators,” he said.

“Agreements have already been reached with various global partners, including between Sars, the IMF and the US National Treasury.”

Mlenzana said they were dealing with 860 cases involving about R13bn due to the fiscus that had not been received.

“A lot of this has to do with bogus VAT claims, and research will look into such scams.”

SA Institute of Tax Professionals chief executive Keith Engel welcomed the study.

“This research gets to the main problem, which is that Sars is too busy auditing taxpayers who are compliant or mostly compliant,” he said.

“The study will have to not only look at those involved in the informal sector, which is often not illegal, but those such as tenderpreneurs who ship vast sums offshore through corrupt practices.”