Cape Town, South African Revenue Service (SARS) Commissioner Edward Kieswetter has warned non-compliant taxpayers and traders that the revenue authority will not tolerate any transgressions of tax and customs laws. The revenue service is ready to act firmly and professionally with those that engages in these practices.
SARS' primary objective is to provide clarity and certainty for taxpayers and traders wishing to comply with their legal obligation by making its easy and seamless to do so. The organization is also enhancing its capability to detect and make it costly for those who are determined to be non-compliant.
In this regard, Commissioner Kieswetter said that compliance with these laws was essential so that SARS could discharge its responsibility to collect enough revenue to ensure that South Africa is able to invest in the growth and development of the country and improve the well-being of all.
Tax crime is not a victimless crime. It directly affects the poorest of the poor who are dependent on basic services including the social security safety net for old age pensioners, child grants and for tertiary education support targeting needy students as well as providing health services, among others.
SARS is therefore determined to enforce the tax and customs laws of the country without fear or favour in a responsible manner when all other legal avenues have been exhausted. We want to remind taxpayers and traders to talk to SARS, before we come to talk to you.
Kieswetter highlighted enforcement actions across various industries and type of offences, including VAT fraud amounting to R5-billion, understatement in income tax declarations amounting to R4-billion, as well as custom offences.
In enforcing customs laws, SARS is part of a joint government working group to stamp out illegal imports, particularly in the clothing, textiles, leather and footwear sectors. These imports are undervalued goods that come into the country and have a devastating impact on local manufacturers who have to shed jobs and further exacerbates unemployment.
In addition, SARS is dertemined to claw back any tax liability from income that may have been derived from alleged criminal activity as highlighted by various commissions of inquiry, which SARS is monitoring and closely co-operating with. A dedicated unit has been established for this purpose.
In the fuel industry, SARS has been investigating various non-compliance activities and has to date raised assessments in excess of R2-billion.
We are investigating fuel refund claims of over R1-billion from major licensed distributors and, where instances of serious non-compliance have been identified, we have handed over the information to the National Prosecuting Authority (NPA), said Kieswetter.
With regard to the tobacco sector, SARS has raised assessments to the value of R60.8-million, of which R32.5-million has been collected. Over the past several months SARS has effectively seized over six containers of cigarettes that have been falsely declared.
In addition, Kieswetter said: We have proactively deployed dedicated personnel at the cigarette manufacturers' facilities to monitor the local production process and the volumes being distributed, allowing SARS to gain better insight into the working of the value chain and the import and exports of all tobacco products.
Transfer pricing remains a major concern across the globe and South Africa is no exception. Significant revenue leaves South Africa every year in the form of intra-group services linked to multinational enterprises (MNEs).
Through such transfer pricing some MNEs engage in aggressive tax planning to create a disconnect between the local activities which give rise to profits and then declare these profits in tax jurisdiction with lower tax rates.
There is a risk that these payments will continue to reduce the sovereign tax base of South Africa to the extent that they are not services that a third party would contract for and / or do not reflect an arm's length price for the services that have been rendered.
The next step will be risk-profiling cases, including an automated transfer pricing risk assessment, selecting cases for in depth auditing and taking criminal action against taxpayers that have failed to comply with our request for information.
Kieswetter said that where warranted SARS might reverse service charges if the MNE fails to provide information to support their claims.
South Africans must take note of these consequences and work with SARS to stamp out tax and customs non-compliance. Our country can only grow and develop if each one of us pay our fair share of tax and does the right thing, Kieswetter concluded.