Thousands of tax cheats in Sars' sights

The SA Revenue Service recently announced that, following a year-long investigation, it had uncovered thousands of local high net worth individuals who were not on the tax register.

South Africa reportedly has 9300 people earning more than R7 million a year or alternatively have assets of more than R75 million.

But Sars records only reflect 360 individuals in this taxpayer category. The loss to the fiscus is estimated to be R48-billion.

Group executive Jonas Makwakwa says Sars will bolster its investigations unit with 70 top-end accountants. A risk intelligence team is being set up.

To uncover non-compliant high net worth individuals, Sars will cross-reference data relating to, for example, property registrations, trusts, vehicle and aircraft ownership, JSE share ownership, investments, private school enrolments and media reports.

So, those with a taste for racehorses, gambling, jewellery, artwork and exotic holiday destinations . be warned.

Although Italy is one of the world's 15 richest nations, based on per-capita GDP, only 0.2% of Italian taxpayers declare income in excess of $250000 a year. So, Italian undercover tax inspectors have of late been looking for well-to-do tax cheats at beaches, yacht clubs and on ski slopes. In Capri, a person found on a luxury yacht was officially listed as having no assets and in need of welfare.

The Credit Suisse Global Wealth Report for 2011 suggests that Sars might be on to something. The report says: "Since last year's inaugural report, global wealth has increased to $231-trillion from $195-trillion in 2010, led by growing wealth in South Africa, India, Australia, Chile and Singapore."

Credit Suisse expects the number of US-dollar millionaires in South Africa to increase from 71000 in 2011 to 243000 by 2016, an increase of 242% over the next five years.

The bank says 116000 South Africans currently rank in the global top 1% of wealth holders.

It can be expected that, globally, the tug-of-war between tax authorities, with reduced tax revenues since the 2007-2008 financial crisis, and high net worth individuals, no doubt feeling they are singled out as easy prey, will intensify.

Some high net worth individuals undeniably have a unique take on tax compliance. Others simply feel that the government is incapable of properly managing the public purse. In 1991, late Australian tycoon Kerry Packer defended his companies' tax-minimisation strategies before parliament: "Of course I am minimising my tax; and if anybody in this country doesn't minimise their tax, they want their heads read because, as a government, I can tell you you're not spending it so well that we should be donating extra."

The issue of deep-pocketed individuals - and their sometimes extravagant lifestyles juxtaposed with their approach to paying taxes - can be emotive, more so in South Africa, with its Gini coefficient of 0.68 - one of the highest in the world.

In 2011 Finance Minister Pravin Gordhan told businessmen that he wanted private industry to create more jobs and reduce inequality:

"For stability and growth in our country, people need money in their pockets ... inequality is not sustainable, he said." - I-Net Bridge

• Van der Walt is director, tax, at Cliffe Dekker Hofmeyr.